Public Choice

, Volume 111, Issue 1–2, pp 127–154 | Cite as

Polarization, Politics and Property Rights: Links Between Inequality and Growth

  • Philip Keefer
  • Stephen Knack

Abstract

We argue that social polarization reduces the security ofproperty and contract rights and, through this channel,reduces growth. The first hypothesis is supported by cross-country evidence indicating that polarization in the form ofincome inequality, land inequality, and ethnic tensions isinversely related to a commonly-used index of the security ofcontractual and property rights. When the security of propertyrights is controlled for in cross-country growth regressions,the relationship between inequality and growth diminishesconsiderably. This and other evidence provides support for oursecond hypothesis, that inequality reduces growth in partthrough its effect on the security of property rights.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Alesina, A. and Drazen, A. (1991). Why are stabilizations delayed? American Economic Review 81: 1170–1188.Google Scholar
  2. Alesina, A., Ozler, S., Roubini, N. and Swagel, P. (1996). Political instability and economic growth. Journal of Economic Growth 1: 189–211.Google Scholar
  3. Alesina, A. and Perotti, R. (1996). Income distribution, political instability, and investment. European Economic Review 40: 1203–1228.Google Scholar
  4. Alesina, A. and Rodrik, D. (1994). Distributive politics and economic growth. Quarterly Journal of Economics 109: 465–490.Google Scholar
  5. Banks, A.S. (1993). Cross-national time-series data archive. SUNY Binghampton.Google Scholar
  6. Barro, R. (2000). Inequality and growth in a panel of countries. Journal of Economic Growth 5: 532.Google Scholar
  7. Barro, R. (1991). Economic growth in a cross section of countries. Quarterily Journal of Economics 106: 407–444.Google Scholar
  8. Barro, R. and Lee, J. (1993). International comparisons of educational attainment. Journal of Monetary Economics 32: 363–394.Google Scholar
  9. Benabou, R. (1996). Inequality and growth. NBER Macroeconomics Annual 11-73.Google Scholar
  10. Berg, A. and Sachs, J. (1988). The debt crisis: Structural explanations of country performance. Journal of Development Economics 29: 271–306.Google Scholar
  11. Binder, S.A. (1995). Partisanship and procedural choice: Institutional change in the early Congress, 1789-1823. The Journal of Politics 57: 1093–1118.Google Scholar
  12. Birdsall, N., Ross, D. and Sabot, R. (1995). Inequality and growth reconsidered: Lessons from East Asia. World Bank Economic Review 9: 477–508.Google Scholar
  13. Black, D. (1958). Theory of committees and elections. Cambridge: Cambridge University Press.Google Scholar
  14. Chen, S., Datt, G. and Ravallion, M. (1994). Is poverty increasing in the developing world? (and unpublished “Statistical addendum”). Review of Income and Wealth 40: 359–376.Google Scholar
  15. Clague, C., Keefer, P., Knack, S. and Olson, M. (1996). Property and contract rights in autocracies and democracies. Journal of Economic Growth 1: 243–276.Google Scholar
  16. Clarke, G.R. (1995). More evidence on income distribution and growth. Journal of Development Economics 47: 403–427.Google Scholar
  17. Davis, O.A., DeGroot, M. and Hinich, M.J. (1972). Social preference orderings and majority rule. Econometrica 40: 147–157.Google Scholar
  18. Deininger, K. and Squire, L. (1996). Measuring income inequality: A new data set. World Bank Economic Review 10: 565–591.Google Scholar
  19. Deininger, K. and Squire, L. (1998). New ways of looking at old issues: Inequality and growth. Journal of Development Economics 5: 259–287.Google Scholar
  20. Esteban, J.-M. and Ray, D. (1994). On the measurement of polarization. Econometrica 62: 819–851.Google Scholar
  21. Forbes, K. (2000). A reassessment of the relationship between inequality and growth. American Economic Review 90: 869–887.Google Scholar
  22. Gastil, R.D. (1986). Freedom in the world. Westport, Conn.: Greenwood.Google Scholar
  23. Haggard, S. and Webb, S.B. (1993). What do we know about the political economy of economic policy reform? World Bank Research Observer 8: 143–168.Google Scholar
  24. Helliwell, J.F. (1994). Empirical linkages between democracy and economic growth. British Journal of Political Science 24: 225–248.Google Scholar
  25. Horowitz, D.L. (1985). Ethnic groups in conflict. Berkeley: University of California Press.Google Scholar
  26. Jazairy, I., Alamgir, M. and Panuccio, T. (1992). State of world rural poverty: An inquiry into its causes and consequences. International Fund for Agricultural Development.Google Scholar
  27. Knack, S. and Keefer, P. (1995). Institutions and economic performance: Cross country tests using alternative institutional measures. Economics and Politics 7: 207–227.Google Scholar
  28. Knack, S. and Keefer, P. (1997a). Does inequality harm growth only in democracies? American Journal of Political Science 41: 323–331.Google Scholar
  29. Knack, S. and Keefer, P. (1997b). Does social capital have an economic payoff? A cross-country investigation. Quarterly Journal of Economics 112: 1251–1288.Google Scholar
  30. McKelvey, R.D. (1976). Intransitivities in multi-dimensional voting models and some implications for agenda control. Journal of Economic Theory 12: 472–482.Google Scholar
  31. McKelvey, R.D. (1986). Covering, dominance, and institution-free properties of social choice. American Journal of Political Science 30: 283–314.Google Scholar
  32. Meltzer, R. and Richard, S. (1981). A rational theory of the size of government. Journal of Political Economy 52: 914–927.Google Scholar
  33. Muller, E.N. and Seligson, M. (1987). Inequality and insurgency. American Political Science Review 81: 425–451.Google Scholar
  34. Murphy, K., Shleifer, A. and Vishny, R. (1989). Income distribution, market size and industrialization. Quarterly Journal of Economics 104: 537–564.Google Scholar
  35. Perotti, R. (1996). Growth, income distribution and democracy: What the data say. Journal of Economic Growth 1: 149–187.Google Scholar
  36. Persson, T. and Tabellini, G. (1994). Is inequality harmful for growth? American Economic Review 84: 600–621.Google Scholar
  37. Plott, C.R. (1967). A notion of equilibrium under majority rule. American Economic Review 57: 787–806.Google Scholar
  38. Rauch, J.E. and Evans, P.B. (2000). Bureaucratic structure and bureaucratic performance in less developed countries. Journal of Public Economics 74: 49–71.Google Scholar
  39. Rodrik, D. (1999). Where did all the growth go? External shocks, social conflict, and growth collapses. Journal of Economic Growth 4: 385–412.Google Scholar
  40. Rosenberg, N. and Birdzell, L.E. (1986). How the west grew rich: The economic transformation of the industrial world. New York: Basic Books.Google Scholar
  41. Russett, B.M. (1964). Inequality and instability: The relation of land tenure to politics. World Politics 16: 442–454.Google Scholar
  42. Shepsle, K. and Weingast, B. (1981). Structure-induced equilibrium and legislative choice. Public Choice 37: 503–519.Google Scholar
  43. Sullivan, M.J. (1991). Measuring global values. New York: Greenwood.Google Scholar
  44. Summers, R. and Heston, A. (1991). The Penn World Table (Mark V): An extended set of international comparisons, 1950-1988. Quarterly Journal of Economics 106: 327–369.Google Scholar
  45. Svensson, J. (1998). Investment, property rights and political instability: Theory and evidence. European Economic Review 42: 1317–1342.Google Scholar
  46. Taylor, C. and Jodice, D. (1983). World handbook of political and social indicators, 3rd ed. New Haven: Yale University Press.Google Scholar
  47. Wang, T.Y., Dixon, W.J., Muller, E.N. and Seligson, M.A. (1993). Inequality and political violence revisited. American Political Science Review 87: 979–993.Google Scholar
  48. World Bank (1997). World development report, 1997: The state in a changing world. New York: Oxford University Press.Google Scholar

Copyright information

© Kluwer Academic Publishers 2002

Authors and Affiliations

  • Philip Keefer
    • 1
  • Stephen Knack
    • 1
  1. 1.The World BankWashington, DCU.S.A

Personalised recommendations