<p>Alesina and Rodrik (1994) wanted to study <strong>whether the impact would be different for democracies vis-a-vis non-democracies</strong> because they show that </p>

<blockquote>
  <p>in a democracy (where the ``median voter theorem'' applies) the rate
  of taxation is higher and the rate of growth lower, the more unequal
  is the distribution of wealth.</p>
</blockquote>

<p>Their model implies that democracies with a more unequal distribution of capital ownership grow less rapidly than more egalitarian democracies. They argue this is because 
the median voter has a relatively small endowment of capital when wealth is unequally distributed, and thus favors high taxes on capital which keep growth low. </p>

<p>They wanted to estimate this prediction by adding a dummy variable for democracies vis-a-vis non-democracies</p>

CC BY-SA 4.0
2020-04-06T15:41:49.350Z
2020-04-06T20:26:39.783Z
2020-04-06T20:26:39.783Z
emeryville
<p>In the <a href="https://dash.harvard.edu/bitstream/handle/1/4551798/alesina_distributive.pdf?sequence=2" rel="nofollow noreferrer">Alesina and Rodrik (1994)</a> study on the impact of inequality on growth, why did they include a dummy for democracies in their empirical estimation? In other words, why did they want to study whether the impact would be different for democracies vis-a-vis non-democracies?</p>

CC BY-SA 4.0
2020-04-06T15:41:04.777Z
Welcome, I changed the title and added a ungated version of the paper.
emeryville
<development-economics>
Inequality and Growth: the Role of Democracy
Mark Lowitski
# Inequality and Growth: the Role of Democracy

(Asked by: username_0 on 2020-04-06)

In the [Alesina and Rodrik (1994)](https://dash.harvard.edu/bitstream/handle/1/4551798/alesina_distributive.pdf?sequence=2) study on the impact of inequality on growth, why did they include a dummy for democracies in their empirical estimation? In other words, why did they want to study whether the impact would be different for democracies vis-a-vis non-democracies?

**Tags:** development-economics

> **Comments:**
> **username_1**: Welcome, I changed the title and added a ungated version of the paper.  

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## 1 answers

### Answer by username_1 on 2020-04-06. Score: 1

Alesina and Rodrik (1994) wanted to study **whether the impact would be different for democracies vis-a-vis non-democracies** because they show that

> in a democracy (where the ``median voter theorem'' applies) the rate
> of taxation is higher and the rate of growth lower, the more unequal
> is the distribution of wealth.

Their model implies that democracies with a more unequal distribution of capital ownership grow less rapidly than more egalitarian democracies. They argue this is because
the median voter has a relatively small endowment of capital when wealth is unequally distributed, and thus favors high taxes on capital which keep growth low.

They wanted to estimate this prediction by adding a dummy variable for democracies vis-a-vis non-democracies


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