EFFICIENCY OF INSTITUTIONS, POLITICAL STABILITY AND INCOME DYNAMICS

Fabrizio Carmignani
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Fabrizio Carmignani: United Nations Economic Commission for Europe

Public Economics from EconWPA

Abstract: In a simple theoretical framework, the quality of institutions affects individual’s investment decisions, and hence income levels and distribution. When institutions deteriorates and inequalities increase, the incumbent undertakes redistributive taxation to maintain political support. The quality of institutions and the extent of redistribution depend on the degree of government responsiveness to citizens and on the credibility of the political opposition to the incumbent. The econometric analysis is based on both single equation models and systems of equations. Good institutions are found to reduce the Gini coefficient and to increase average income, growth, and income of the poor. However, some non-linearites are detected in the institutions-Gini relationship.

Keywords: Institutions; income distribution; poverty; per-capita income; growth (search for similar items in EconPapers)
JEL-codes: D3 D7 O4 I3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pol
Date: 2005-03-22
Note: Type of Document - pdf; pages: 27
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwppe:0503007

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