How does democracy affect inequality?

Acemoglu and Robinson have a good post on this and some related issues, excerpt:

…there is a much more limited effect of democracy on inequality. Democracy just doesn’t seem to affect inequality much. Though this might reflect the poorer quality of inequality data, there is likely more to this lack of correlation between democracy and inequality. In fact, we do find heterogeneous effects of democracy on inequality consistent with the theories mentioned above, which would not have been possible if the poor quality of inequality data made it hard to find any empirical relationship.

Overall, our results suggest that democracy does represent a real shift in political power away from elites and has first-order consequences for redistribution and government policy. But the impact of democracy on inequality may be more limited than one might have expected.

The pointer is from Samir Varma.  Here is an earlier post on democracy and inequality, broadly consistent with the claims of Acemoglu and Robinson.


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