Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/20749
Authors: 
Cervellati, Matteo
Fortunato, Piergiuseppe
Sunde, Uwe
Year of Publication: 
2005
Series/Report no.: 
IZA Discussion paper series 1450
Abstract: 
We analyze the endogenous evolution of economic and political institutions and the interdependencies with the process of economic development. Favorable economic institutions ensure the appropriability of rents in form of a state of law. We study the conditions under which a state of law can be implemented under oligarchy, and when democratization is necessary. Inequality in endowments and incomes prolongs the absence of good institutions and delays democratization. Conversely, institutions shape the income distribution. Simulations illustrate how inequality affects the development process and may lead to overtaking and divergence. The implications are in line with historical and empirical evidence.
Subjects: 
inequality
democratization
institutions
state of law
long-term development
JEL: 
N10
O20
H10
Document Type: 
Working Paper

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