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Efficiency of Institutions, Political Stability and Income Dynamics

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  • Fabrizio Carmignani

Abstract

In a simple theoretical framework, the quality of institutions affects individual investment decisions, and hence impacts income levels and distribution. When institutions deteriorate and inequalities increase, the incumbent undertakes redistributive taxation to maintain political support. The quality of institutions and the extent of redistribution depend on the degree of government responsiveness to citizens, and on the credibility of the political opposition to the incumbent. The econometric analysis is based on both single equation models and systems of equations. Good institutions are found to reduce the Gini coefficient and to increase average income, growth, and income of the poor. However, some non-linearities are detected in the institutions–Gini relationship.

Suggested Citation

  • Fabrizio Carmignani, 2007. "Efficiency of Institutions, Political Stability and Income Dynamics," The IUP Journal of Managerial Economics, IUP Publications, vol. 0(1), pages 6-30, February.
    • Handle: RePEc:icf:icfjme:v:05:y:2007:i:1:p:6-30
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    3. Alessandra Allini & Luca Ferri & Marco Maffei & Annamaria Zampella, 2017. "The Effect of Perceived Corruption on Entrepreneurial Intention: Evidence from Italy," International Business Research, Canadian Center of Science and Education, vol. 10(6), pages 75-86, June.

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    JEL classification:

    • D3 - Microeconomics - - Distribution
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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