Inequality in Developing Economies: The Role of Institutional Development

Paper number: 11/07

Paper date: 15th April 2011

Year: 2011

Paper Category: Discussion Paper

Authors

Adalgiso Amendola, Joshy Easaw and Antonio Savoia

Abstract

This paper studies the distributive impact of institutional change in developing countries. In such economies, property rights systems may preserve the interests of an influential minority, who can control key-markets, access to assets and investment opportunities, especially if they enjoy disproportionate political power. We test this hypothesis using cross-section and panel data methods on a sample of low- and middle-income economies from Africa, Asia and Latin America. Results suggest that: (a) increasing property rights protection increases income inequality; (b) this effect is larger in low-democracy environments; (c) few countries have developed political institutions capable of counterbalancing this effect.

Keywords: Inequality, developing economies, institutions, property rights, democracy
JEL: O15, O17, D70

Inequality in Developing Economies: The Role of Institutional Development Inequality in Developing Economies: The Role of Institutional Development