Economics at your fingertips  

Inequality, extractive institutions, and growth in nondemocratic regimes

Nobuhiro Mizuno (), Katsuyuki Naito and Ryosuke Okazawa ()

Public Choice, 2017, vol. 170, issue 1, 115-142

Abstract: Abstract This study investigates the effect of income inequality on economic growth in nondemocratic regimes. We provide a model in which a self-interested ruler chooses an institution that constrains his or her policy choice. The ruler must care about the extent of citizens’ support in order to remain in power. Under an extractive institution, the ruler can extract a large share of citizens’ wealth, but faces a high probability of losing power because of low public support. We show that inequality affects the ruler’s tradeoff between the expropriation of citizens’ wealth and his or her hold on power. Substantial inequality among citizens makes support for the ruler inelastic with respect to his or her institutional choice. The ruler therefore chooses an extractive institution, which impedes investment and growth. These results provide an explanation for the negative relationship between inequality and growth as well as the negative relationship between inequality and institutional quality, both of which are observed in nondemocratic countries.

Keywords: Dictatorship; Economic growth; Inequality; Institutions (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Inequality, extractive institutions, and growth in nondemocratic regimes (2012) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/11127/PS2

Access Statistics for this article

Public Choice is currently edited by WIlliam F. Shughart II

More articles in Public Choice from Springer
Bibliographic data for series maintained by Sonal Shukla ().

Page updated 2019-10-11
Handle: RePEc:kap:pubcho:v:170:y:2017:i:1:d:10.1007_s11127-016-0387-7