Skip to main content
SpringerLink
Log in

Inequality Undermines Democracy and Growth

  • Conference paper
  • First Online:
Yearning for Inclusive Growth and Development, Good Jobs and Sustainability

Abstract

Income equality and trust seem to go along with several other ingredients of social capital as determinants of economic growth across the globe. In a large sample of countries, equality in the distribution of income as measured by the World Bank and by The Standardized World Income Inequality Database are seen to be correlated with economic diversification, the rule of law, transparency as measured by the corruption perceptions index from Transparency International, trust as measured in the World Values Survey, and democracy, all of which are good for growth as reflected in the purchasing power of per capita national income.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 129.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 169.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 169.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    See also Stiglitz (2015).

  2. 2.

    See also Milanovic (2016).

  3. 3.

    See Mishel and Schieder (2018).

  4. 4.

    Gylfason (2018) reports results for three different measures of economic diversification—i.e., the Theil index used here, the IMF’s product quality index, and the economic complexity index developed by Hidalgo and Hausmann (2009)—and also for three different measures of political diversification—i.e., the Polity2 index used here as well as the civil liberties and political rights indices compiled by Freedom House (2018).

  5. 5.

    See also Global Wealth Report (2017).

  6. 6.

    See also Alesina and Rodrik (1994), Persson and Tabellini (1994), and Gylfason and Zoega (2003). For a survey of the literature on inequality in macroeconomics, see Rios-Rull and Quadrini (2015).

References

  • Acocella, N., Di Bartolomeo, G., & Tirelli, P. (2009). The macroeconomics of social pacts. Journal of Economic Behavior and Organization, 72(1), 202–213.

    Article  Google Scholar 

  • Alesina, A., & Rodrik, D. (1994). Distributive politics and economic growth. Quarterly Journal of Economics, 109, 165–190.

    Article  Google Scholar 

  • Berg, A., & Ostry, J. D. (2017). Inequality and unsustainable growth: Two sides of the same coin? IMF Economic Review, 65(4), 792–815.

    Article  Google Scholar 

  • Berg, A., Ostry, J. D., Tsangarides, C. G., & Yakhshilikov, Y. (2018). Redistribution, inequality, and growth: New evidence. Journal of Economic Growth, 23(3), 259–305.

    Article  Google Scholar 

  • Campano, F., & Salvatore, D. (2006). Income distribution. New York: Oxford University Press.

    Book  Google Scholar 

  • Card, D., Mas, E. M., & Saez, E. (2012). Inequality at work: The effect of peer salaries on job satisfaction. American Economic Review, 102(6), 2981–3003.

    Article  Google Scholar 

  • Case, A., & Deaton, A. (2017). Mortality and morbidity in the 21st century. Brookings Papers on Economic Activity, 1, 397–467.

    Article  Google Scholar 

  • Deaton, A. (2013). The great escape: Health, wealth, and the origins of inequality. Princeton, NJ and Oxford, England: Princeton University Press.

    Book  Google Scholar 

  • Duesenberry, J. S. (1949). Income, saving and the theory of consumer behavior. Cambridge, MA: Harvard University Press.

    Google Scholar 

  • Freedom House. (2018). Freedom in the World 2018, United States Profile. Retrieved October 8, from https://freedomhouse.org/report/freedom-world/2016/united-states and https://freedomhouse.org/report/freedom-world/2018/united-states

  • Galbraith, J. K. (2012). Inequality and instability: A study of the World economy just before the great crisis. Oxford and New York: Oxford University Press.

    Book  Google Scholar 

  • Gallup. (2013). In J. Sonnenschein, J. Ray (eds.) Government corruption viewed as pervasive worldwide. Retrieved October 1, 2018, from http://www.gallup.com/poll/165476/government-corruption-viewed-pervasive-worldwide.aspx

  • Gallup. (2018). Confidence in institutions. Retrieved October 1, 2018, from https://news.gallup.com/poll/1597/confidence-institutions.aspx

  • Global Wealth Report. (2017). Credit Suisse Research Institute. Retrieved April 24, 2018, from https://www.credit-suisse.com/corporate/en/articles/news-and-expertise/global-wealth-report-2017-201711.html.

  • Gylfason, T. (2017). From double diversification to efficiency and growth. Comparative Economic Studies, 59, 149–168.

    Article  Google Scholar 

  • Gylfason, T. (2018). Political economy, Mr. Churchill, and natural resources. Mineral Economics, 31, 23–34.

    Article  Google Scholar 

  • Gylfason, T., & Lindbeck, A. (1984a). Competing wage claims, cost inflation, and capacity utilization. European Economic Review, 24(1), 1–21.

    Article  Google Scholar 

  • Gylfason, T., & Lindbeck, A. (1984b). Union rivalry and wages: An oligopolistic approach. Economica, 51(2), 129–139.

    Article  Google Scholar 

  • Gylfason, T., & Wijkman, P. M. (2016). Double diversification with an application to Iceland. In S. Mahroum & Y. Al-Saleh (Eds.), Economic diversification policies in natural resource rich economies. London and New York: Routledge.

    Google Scholar 

  • Gylfason, T., & Zoega, G. (2003). Inequality and economic growth: Do natural resources matter? In T. Eicher & S. Turnovsky (Eds.), Inequality and growth: Theory and policy implications. Cambridge, MA, and London: MIT Press.

    Google Scholar 

  • Hidalgo, C. A., & Hausmann, R. (2009). The building blocks of economic complexity. In P. S. Dasgupta (ed.), Proceedings of the National Academy of Sciences of the United States of America (Vol. 106, No. 26, pp. 10570–10575).

    Google Scholar 

  • Kaldor, N. (1961). Capital accumulation and economic growth. In F. Lutz & D. C. Hague (Eds.), The theory of capital. London: Macmillan.

    Google Scholar 

  • Levitsky, S., & Ziblatt, D. (2018). How democracies die. New York: Crown.

    Google Scholar 

  • Milanovic, B. (2005). Worlds apart: Measuring international and global inequality. Princeton and Oxford: Princeton University Press.

    Google Scholar 

  • Milanovic, B. (2016). Global inequality: A new approach for the age of globalization. Cambridge and London: Belknap Press of Harvard University Press.

    Book  Google Scholar 

  • Mishel, L., & Schieder, J. (2018, August 16). CEO compensation surged in 2017. Economic Policy Institute. https://www.epi.org/publication/ceo-compensation-surged-in-2017/

  • Mounk, Y. (2018). The People V. Democracy: Why our freedom is in danger & how to save it. Cambridge, MA and London: Harvard University Press.

    Book  Google Scholar 

  • Page, B. I., & Gilens, M. (2017). Democracy in America? What has gone wrong and what we can do about it. Chicago, IL and London: University of Chicago Press.

    Book  Google Scholar 

  • Persson, T., & Tabellini, G. (1994). Is inequality harmful for growth? American Economic Review, 84(3), 600–621.

    Google Scholar 

  • Piketty, T. (2014). Capital in the twenty-first century. Cambridge, MA: Harvard University Press.

    Book  Google Scholar 

  • Polity IV Project. Retrieved January 17, 2019., from http://www.systemicpeace.org/polityproject.html

  • Putnam, R. D. (2000). Bowling alone. New York: Simon and Schuster.

    Google Scholar 

  • Rajan, R. G. (2011). Fault lines: How hidden fractures still threaten the world economy. Princeton, NJ, and Oxford: Princeton University Press.

    Book  Google Scholar 

  • Rios-Rull, V., & Quadrini, V. (2015). Inequality in macroeconomics. In A. B. Atkinson & F. Bourguignon (Eds.), Handbook of income distribution 2 (pp. 1229–1302). Amsterdam: Elsevier.

    Google Scholar 

  • Sachs, J. D., & Warner, A. M. (1995, revised 1997, 1999). Natural resource abundance and economic growth (NBER Working Paper 5398), Cambridge, MA.

    Google Scholar 

  • Snyder, T. (2018). The road to unfreedom: Russia, Europe, America. New York: Tim Duggan Books, Crown, Penguin Random House.

    Google Scholar 

  • Solt, F. (2016). The standardized world income inequality database. Social Science Quarterly, 97(5), 1267–1281. SWIID Version 6.2, March 2018. (2018-03-23).

    Article  Google Scholar 

  • Stiglitz, J. E. (2013). The price of inequality: How today’s divided society endangers our future. New York and London: W. W. Norton and Company.

    Book  Google Scholar 

  • Stiglitz, J. E. (2015). The great divide: Unequal societies and what we can do about them. New York and London: W. W. Norton and Company.

    Google Scholar 

  • Transparency International. (2018). Corruption Perceptions Index 2017. Retrieved October 8, 2018, from https://www.transparency.org/news/feature/corruption_perceptions_index_2017.

  • World Inequality Database. (2018). World Inequality Database. Retrieved January 13, 2019, from https://wid.world/

  • World Justice Project. (2018). Retrieved January 17, 2019, from https://worldjusticeproject.org/

  • World Values Survey. (2014). Interpersonal trust. Retrieved October 4, 2019, from http://www.jdsurvey.net/jds/jdsurveyMaps.jsp?Idioma=I&SeccionTexto=0404&NOID=104

  • Zucman, G. (2013). The missing wealth of nations: Are Europe and the U.S. net Debtors or net Creditors? Quarterly Journal of Economics, 128(3), 1321–1364.

    Article  Google Scholar 

  • Zucman, G. (2015). The hidden wealth of nations: The scourge of tax havens. Chicago, IL, and London: University of Chicago Press.

    Book  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. CESifo, University of Iceland, and Research Associate, Munich, Germany

    Thorvaldur Gylfason

Authors
  1. Thorvaldur Gylfason
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Thorvaldur Gylfason .

Editor information

Editors and Affiliations

  1. FUET, Economics Foundation, University of Rome Tor Vergata, Rome, Italy

    Luigi Paganetto

Rights and permissions

Reprints and permissions

Copyright information

© 2019 Springer Nature Switzerland AG

About this paper

Check for updates. Verify currency and authenticity via CrossMark

Cite this paper

Gylfason, T. (2019). Inequality Undermines Democracy and Growth. In: Paganetto, L. (eds) Yearning for Inclusive Growth and Development, Good Jobs and Sustainability. Springer, Cham. https://doi.org/10.1007/978-3-030-23053-1_9

Download citation

Publish with us

Policies and ethics

Search

Navigation