Hobbes to Rousseau: Inequality, Institutions and Development

Authors: Cervellati, Matteo¹; Fortunato, Piergiuseppe²; Sunde, Uwe³

Source: The Economic Journal, Volume 118, Number 531, August 2008 , pp. 1354-1384(31)

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Abstract:

This article studies the endogenous evolution of economic and political institutions and the interdependencies with the process of economic development. Favourable economic institutions in the form of a state of law and absence of societal conflict arise in equilibrium. Democracies are neither necessary nor sufficient to implement a state of law, even if they may be instrumental. Efficient oligarchies can emerge and persist supported by the consensus of all groups. A taxonomy of politico-economic equilibria shows the endogenous evolution of institutions depending on economic inequality and natural resource abundance, implying a non-monotonic relationship between inequality and institutional quality.

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1468-0297.2008.02173.x

Affiliations: 1: University of Bologna, IAE, Barcelona and IZA, Bonn 2: United Nations 3: University of St. Gallen, IZA, Bonn and CEPR

Publication date: 2008-08-01