The chicken or the egg: An experimental study of democracy survival, income, and inequality

Dmitry Ryvkin and Anastasia Semykina

No wp2015_11_01, Working Papers from Department of Economics, Florida State University

Abstract: Many empirical studies investigate the relationships between economic development, inequality, and democracy survival; however, establishing causal links with naturally occurring cross-country data is problematic. We address this question in a laboratory experiment, where in democracy citizens can invest in profitable projects and vote on income taxation. In the alternative regime -- autocracy -- efficient investment levels and equitable redistribution are implemented exogenously, but there is a risk of resources being partially expropriated. Citizens can voluntarily switch from democracy to autocracy by a majority vote, which mimics recent historical examples, where voters voluntarily delegate political powers to an autocrat in exchange for a promise of high taxation and redistribution. We find that the likelihood of democracy breakdown increases with the degree of inequality but does not vary with productivity. The link between productivity and democracy survival depends critically on the degree of sophistication of the median voter.

Keywords: democracy breakdown; economic productivity; inequality; voting; experiment (search for similar items in EconPapers)
JEL-codes: C92 D72 P48 (search for similar items in EconPapers)
Pages: 45
Date: 2015-11
New Economics Papers: this item is included in nep-cdm, nep-exp and nep-pol
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