Oligarchy, democracy, inequality and growth

Bourguignon, Françoìs; Verdier, Thierry

doi:10.1016/s0304-3878(00)00086-9

Cited by 445 publications

(316 citation statements)

References 17 publications

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“…In contrast, Bourguignon and Verdier (2000) argue that the perceived benefit to the poor is not due to the financial development of a country but to the reliance of the poor on informal credit assessment networks. This implies that the poor are still denied access to bank credit due to credit constraints.…”

Section: Finance-growth-income Inequalitymentioning

confidence: 87%

Finance and income inequality in Kazakhstan: evidence since transition with policy suggestions

2017

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Kazakhstan gained independence in 1990 and has undergone significant changes in economic, social and trade conditions since then. We analyse the effects of financial development on income inequality in Kazakhstan, incorporating economic growth, foreign investment, education and the role of democracy as the drivers. We establish that income inequality in Kazakhstan is impaired by financial development. In summary, we send the three messages for policy purposes. First, strengthening financial sector is necessary to close the gap between 'haves and have-nots'. Second, attracting foreign direct investment beyond the hydrocarbon sector is necessary to alleviate inequality. Finally, adaptation of education system to the new social and economic environment would help in improving income distribution.

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Section: Finance-growth-income Inequalitymentioning

confidence: 87%

Finance and income inequality in Kazakhstan: evidence since transition with policy suggestions

2017

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“…Mineral wealth may prevent redistribution of political power towards the middle classes and thus prevent adoption of growth-promoting policies (Bourguignon and Verdier, 2000). Resource wealth worsens quality of institutions, since it allows governments to pacify dissent, avoid accountability and resist modernization (Isham, et al, 2003).…”

Section: Turning the Resource Curse Into A Blessing: Good Institutionmentioning

confidence: 99%

Natural Resources: Curse or Blessing?

Ploeg

2011

Journal of Economic Literature

1,317

177

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract Are natural resources a "curse" or a "blessing"? The empirical evidence suggests either outcome is possible. The paper surveys a variety of hypotheses and supporting evidence for why some countries benefit and others lose from the presence of natural resources. These include that a resource bonanza induces appreciation of the real exchange rate, deindustrialization and bad growth prospects, and that these adverse effects are more severe in volatile countries with bad institutions and lack of rule of law, corruption, presidential democracies, and underdeveloped financial systems. Another hypothesis is that a resource boom reinforces rent grabbing and civil conflict especially if institutions are bad, induces corruption especially in non-democratic countries, and keeps in place bad policies. Finally, resource rich developing economies seem unable to successfully convert their depleting exhaustible resources into other productive assets. The survey also offers some welfare-based fiscal rules for harnessing resource windfalls in developed and developing economies. Terms of use: Documents inJEL-Code: C12, C13, E01, F43, K42, O41, Q30.

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“…In contrast to their study, we focus on the elasticity of citizens' support as the mechanism through which income inequality affects a ruler's policy choices and economic development. Acemoglu and Robinson (2000) and Bourguignon and Verdier (2000) also consider an environment in which the policy choices of the elite affect their hold on power, and analyze how inequality affects their policy choices. Acemoglu and Robinson (2000) provide a model in which the elite attempt to prevent revolution by making concessions to citizens, such as a temporary income redistribution or franchise extensions.…”

Section: Related Literaturementioning

confidence: 99%

“…This conclusion contrasts with our findings, as presented in this paper. 4 Bourguignon and Verdier (2000) propose a model in which the elite in power choose a fraction of the poor to receive education subsidies. While educating the poor enhances the income of the elite owing to the externality of education, it also brings about political participation by the educated poor.…”

Section: Related Literaturementioning

confidence: 99%

Inequality, extractive institutions, and growth in nondemocratic regimes

2016

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This study investigates the effect of inequality on economic growth in nondemocratic regimes. We provide a model in which a self-interested ruler chooses an institution that constrains his or her policy choice. The ruler must care about the support share of citizens in order to keep power. Under an extractive institution, the ruler can extract a large share of citizens' wealth, but faces a high probability of losing power because of low public support. We show that inequality affects the ruler's trade-off between the expropriation of citizens' wealth and his or her hold on power. Large inequality among citizens makes the support share for the ruler inelastic with respect to his or her choice of institution. Thus, the ruler chooses an extractive institution, which impedes investment and growth. These results provide an explanation for the negative relationship between inequality and growth and the negative relationship between inequality and the quality of institutions, both of which are observed in nondemocratic countries.JEL classification: O11, D31, P14, P16

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Oligarchy, democracy, inequality and growth

Cited by 445 publications

References 17 publications

Finance and income inequality in Kazakhstan: evidence since transition with policy suggestions

Finance and income inequality in Kazakhstan: evidence since transition with policy suggestions

Natural Resources: Curse or Blessing?

Inequality, extractive institutions, and growth in nondemocratic regimes

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