Wealth inequality and democracy

Sutirtha Bagchi and Matthew J. Fagerstrom
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Matthew J. Fagerstrom: University of Pennsylvania

Public Choice, 2023, vol. 197, issue 1, No 3, 89-136

Abstract: Abstract Scholars have studied the relationship between land inequality, income inequality, and democracy extensively, but have reached contradictory conclusions that have resulted from competing theories and methodologies. However, despite its importance, the effects of wealth inequality on democracy have not been examined empirically. We use a panel dataset of billionaire wealth from 1987 to 2012 to determine the impact of wealth inequality on the level of democracy. We measure democracy using Polity scores, Varieties of Democracy (V-Dem) indices, and the continuous Machine Learning index. We find limited empirical support for the hypothesis that overall wealth inequality or inherited wealth inequality has an impact on democracy. However, we find evidence that politically connected wealth inequality lowers V-Dem and Machine Learning democracy scores. Following Boix (Democracy and redistribution, Cambridge University Press, New York, 2003), we investigate the hypothesis that capital mobility moderates the relationship between wealth inequality and democracy and find evidence that increased capital mobility mitigates the negative impact of politically connected wealth inequality on democracy.

Keywords: Wealth inequality; Democratization; Capital mobility (search for similar items in EconPapers)
JEL-codes: D31 H11 P48 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11127-023-01082-9

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