When Inequality Matters: The Role of Wealth during Democratic Transitions

• In Event: Facets of Inequality

Abstract

Are the material gains from democratic transitions conditioned by pre-existing economic, social, and political inequalities? A growing body of literature argues that more equal societies promote social cohesion, better health, and a higher standard of living. Theories to explain why more equal societies have a higher quality of life range from efficient public good provision to greater fairness and social capital. These theories cannot however account for the fact that most of the improvements in citizen welfare took place at a time when many societies were still relatively unequal. In this study, I exploit quasi-random variation in land concentration to examine the evolving effects of wealth inequality following two separate waves of democratization in nineteenth century England. I use the geographic boundary between distinct pre-Norman historical states in a regression discontinuity design (RDD) framework to identify how the initial differences in wealth distribution across these historical states impacted the evolution of development and well-being during England's gradual transition toward a more inclusive democracy. I find that early self-governance, which gave way to institutional privileges and elite capture, explains much of the variation in public spending during transitions. Evidence suggests that political economy factors, such as the removal of historical privileges, is crucial for our understanding of why living standards improved in some parts of England and not others. The paper contributes to the literature on the historical origins of present-day institutions and the implications of wealth inequality for development in transitional democracies.

Author

• Ali Tanveer Ahmed, New York University