Skip to main content

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

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.

This is a preview of subscription content, access via your institution.

References

  • Alesina, A. and Drazen, A. (1991). Why are stabilizations delayed? American Economic Review 81: 1170–1188.

    Google Scholar 

  • Alesina, A., Ozler, S., Roubini, N. and Swagel, P. (1996). Political instability and economic growth. Journal of Economic Growth 1: 189–211.

    Google Scholar 

  • Alesina, A. and Perotti, R. (1996). Income distribution, political instability, and investment. European Economic Review 40: 1203–1228.

    Google Scholar 

  • Alesina, A. and Rodrik, D. (1994). Distributive politics and economic growth. Quarterly Journal of Economics 109: 465–490.

    Google Scholar 

  • Banks, A.S. (1993). Cross-national time-series data archive. SUNY Binghampton.

  • Barro, R. (2000). Inequality and growth in a panel of countries. Journal of Economic Growth 5: 532.

    Google Scholar 

  • Barro, R. (1991). Economic growth in a cross section of countries. Quarterily Journal of Economics 106: 407–444.

    Google Scholar 

  • Barro, R. and Lee, J. (1993). International comparisons of educational attainment. Journal of Monetary Economics 32: 363–394.

    Google Scholar 

  • Benabou, R. (1996). Inequality and growth. NBER Macroeconomics Annual 11-73.

  • Berg, A. and Sachs, J. (1988). The debt crisis: Structural explanations of country performance. Journal of Development Economics 29: 271–306.

    Google Scholar 

  • 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 

  • 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 

  • Black, D. (1958). Theory of committees and elections. Cambridge: Cambridge University Press.

    Google Scholar 

  • 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 

  • 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 

  • Clarke, G.R. (1995). More evidence on income distribution and growth. Journal of Development Economics 47: 403–427.

    Google Scholar 

  • Davis, O.A., DeGroot, M. and Hinich, M.J. (1972). Social preference orderings and majority rule. Econometrica 40: 147–157.

    Google Scholar 

  • Deininger, K. and Squire, L. (1996). Measuring income inequality: A new data set. World Bank Economic Review 10: 565–591.

    Google Scholar 

  • 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 

  • Esteban, J.-M. and Ray, D. (1994). On the measurement of polarization. Econometrica 62: 819–851.

    Google Scholar 

  • Forbes, K. (2000). A reassessment of the relationship between inequality and growth. American Economic Review 90: 869–887.

    Google Scholar 

  • Gastil, R.D. (1986). Freedom in the world. Westport, Conn.: Greenwood.

    Google Scholar 

  • 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 

  • Helliwell, J.F. (1994). Empirical linkages between democracy and economic growth. British Journal of Political Science 24: 225–248.

    Google Scholar 

  • Horowitz, D.L. (1985). Ethnic groups in conflict. Berkeley: University of California Press.

    Google Scholar 

  • 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.

  • 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 

  • Knack, S. and Keefer, P. (1997a). Does inequality harm growth only in democracies? American Journal of Political Science 41: 323–331.

    Google Scholar 

  • 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 

  • 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 

  • McKelvey, R.D. (1986). Covering, dominance, and institution-free properties of social choice. American Journal of Political Science 30: 283–314.

    Google Scholar 

  • Meltzer, R. and Richard, S. (1981). A rational theory of the size of government. Journal of Political Economy 52: 914–927.

    Google Scholar 

  • Muller, E.N. and Seligson, M. (1987). Inequality and insurgency. American Political Science Review 81: 425–451.

    Google Scholar 

  • Murphy, K., Shleifer, A. and Vishny, R. (1989). Income distribution, market size and industrialization. Quarterly Journal of Economics 104: 537–564.

    Google Scholar 

  • Perotti, R. (1996). Growth, income distribution and democracy: What the data say. Journal of Economic Growth 1: 149–187.

    Google Scholar 

  • Persson, T. and Tabellini, G. (1994). Is inequality harmful for growth? American Economic Review 84: 600–621.

    Google Scholar 

  • Plott, C.R. (1967). A notion of equilibrium under majority rule. American Economic Review 57: 787–806.

    Google Scholar 

  • 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 

  • 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 

  • 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 

  • Russett, B.M. (1964). Inequality and instability: The relation of land tenure to politics. World Politics 16: 442–454.

    Google Scholar 

  • Shepsle, K. and Weingast, B. (1981). Structure-induced equilibrium and legislative choice. Public Choice 37: 503–519.

    Google Scholar 

  • Sullivan, M.J. (1991). Measuring global values. New York: Greenwood.

    Google Scholar 

  • 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 

  • Svensson, J. (1998). Investment, property rights and political instability: Theory and evidence. European Economic Review 42: 1317–1342.

    Google Scholar 

  • Taylor, C. and Jodice, D. (1983). World handbook of political and social indicators, 3rd ed. New Haven: Yale University Press.

    Google Scholar 

  • 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 

  • World Bank (1997). World development report, 1997: The state in a changing world. New York: Oxford University Press.

    Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Keefer, P., Knack, S. Polarization, Politics and Property Rights: Links Between Inequality and Growth. Public Choice 111, 127–154 (2002). https://doi.org/10.1023/A:1015168000336

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1023/A:1015168000336

Keywords

  • Public Finance
  • Growth Regression
  • Social Polarization
  • Ethnic Tension
  • Land Inequality