#  Inequality, extractive institutions, and growth in nondemocratic regimes 

Mizuno, Nobuhiro and Naito, Katsuyuki and Okazawa, Ryosuke (2012): _Inequality, extractive institutions, and growth in nondemocratic regimes._

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## Abstract

This paper investigates the effect of inequality on economic growth in nondemocratic regimes. We provide a model where a self-interested ruler chooses an institution that constrains the policy choice of the ruler. The ruler must care about the support share of citizens 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 due to low public support. We show that inequality affects the ruler's trade-off between his or her expropriation of citizens' wealth and hold on power. Larger inequality among citizens makes the support share for the ruler less responsive to the choice of the institution by the ruler. This situation allows the ruler to choose an extractive institution without a significant increase in the risk of losing power. Hence, large inequality leads to extractive institutions and impedes investment and growth. These results provide an explanation for the negative relationship between inequality and growth observed in nondemocratic countries and the negative relationship between inequality and quality of institutions.

Item Type: |  MPRA Paper   
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Original Title: | Inequality, extractive institutions, and growth in nondemocratic regimes  
Language: | English  
Keywords: | Dictatorship; Economic Growth; Inequality; Institutions  
Subjects: | O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development  
D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions  
P - Economic Systems > P1 - Capitalist Systems > P16 - Political Economy  
Item ID: | 41434  
Depositing User: |  Nobuhiro Mizuno  
Date Deposited: | 19\. Sep 2012 11:40  
Last Modified: | 04\. Jan 2016 07:23  
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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/41434  
  
### Available Versions of this Item

  * Inequality, extractive institutions, and growth in nondemocratic regimes. (deposited 19. Sep 2012 11:40) **[Currently Displayed]**
    * Inequality, extractive institutions, and growth in nondemocratic regimes. (deposited 05. Aug 2015 17:35)