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Wealth Inequality and Democracy

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Abstract

Scholars have studied the relationship between land inequality, income inequality, and democracy extensively, but have reached contradictory conclusions that have resulted from competing theories and methodologies. However, despite its importance, the effects of wealth inequality on democracy have not been examined empirically. We use a panel dataset of billionaire wealth from 1987 to 2012 to determine the impact of wealth inequality on the level of democracy. To measure democracy, we rely on Polity scores and the Varieties of Democracy (V-Dem) index. We find no empirical support for the hypothesis that overall wealth inequality or inherited wealth inequality has an impact on democracy. However, we find evidence that politically connected wealth inequality lowers V-Dem scores. Following Boix (2003), we investigate the hypothesis that capital mobility moderates the relationship between wealth inequality and democracy and find evidence that increased capital mobility mitigates the negative impact of politically connected wealth inequality on democracy.

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  • Sutirtha Bagchi & Matthew J. Fagerstrom, 2022. "Wealth Inequality and Democracy," Villanova School of Business Department of Economics and Statistics Working Paper Series 57, Villanova School of Business Department of Economics and Statistics.
    • Handle: RePEc:vil:papers:57
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    Keywords

    Wealth Inequality; Democratization; Capital Mobility;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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