DP4739 Inequality and Institutions

Author(s): Alberto Chong, Mark Gradstein
Publication Date: November 2004
Keyword(s): causality, governance, inequality, institutions
JEL(s): D70, O15, O17
Programme Areas: Public Economics, Institutions and Economic Performance
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4739

This Paper presents theory and evidence on the relationship between inequality and institutional quality. We exhibit a model in which the two dynamically reinforce each other and set to test this relationship with a broad array of institutional measures. We establish the double causality between institutional strength and a more equal distribution of income and show its robustness to different data sources that cover various time-spans and to changes in specification.