Can income inequality promote democratization?

Laura Policardo and Edgar Sánchez Carrera ()

Metroeconomica, 2020, vol. 71, issue 3, 510-532

Abstract: The aim of this paper is to study the effect of income inequality on the probability of democratization, in a panel of 51 transition countries during the period 1960–2008. Using a conditional fixed‐effect logit estimation, we find robust results suggesting that income inequality (measured by the Gini index of household’s income inequality) has an inverse—U‐shaped relation with the probability of transition from autarchy to democracy. We show that there is a turning point at a level of household’s income inequality equal to a Gini index of 40. When income inequality is below 40, then probability of transition is positively related to inequality, but when inequality is higher, a subsequent increase in inequality decreases the probability of democratization. This is consistent with Acemoglu and Robinson’s theory that shows how transitions are likeliest at moderate levels of inequality, while autocracy is likelier at the lowest and highest levels of inequality.

Date: 2020
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