Life may be unfair, but do democracies make it any less burdensome?

Ọláyínká Oyèkọ́lá ()
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Ọláyínká Oyèkọ́lá: University of Exeter
Authors registered in the RePEc Author Service: Olayinka Oyekola

The Journal of Economic Inequality, 2024, vol. 22, issue 3, No 3, 577-602

Abstract: Abstract Using a large panel of countries, this paper studies whether, or not, democracies can disproportionately produce better economic outcomes for the poor than non-democracies. To deal with the endogeneity of democracy and inequality, a regional democratisation wave is used to isolate the exogenous variation in country-level democracy. Our main finding is that the exogenous component of democracy significantly and robustly decreased inequality in the long run, after controlling for key inequality determinants. We identify that the two potential mechanisms through which democracy affects inequality are structural transformation and middle-class bias channels. However, we find that this negative democracy-inequality link is reversed in the short run.

Keywords: Democracy; Inequality; Structural transformation; Middle-class bias; Captured democracy (search for similar items in EconPapers)
JEL-codes: O10 P16 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10888-023-09607-4

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