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Which Institutions are more relevant than others in inequality mitigation?

Mamoon, Dawood (2005): Which Institutions are more relevant than others in inequality mitigation?

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Abstract

The paper estimates the respective contributions of legal, economic, political and social institutions on inequalities within countries across the globe, while using various measures of openness and trade policy as our control group. The results suggest that institutions have significant effects on inequality. Among legal institutions, rule of law and control for corruption have a stronger impact on inequality than voice and accountability. Though we find that countries which practice democracy are less prone to unequal outcomes, we also find that autocratic setups may not necessarily lead to greater inequalities. Both frameworks may carry redistributive effects, as both are found to be positively associated with the incomes of the poorest and negatively associated with the incomes of the richest. Secondly, whether a country is politically stable is rather a more decisive institutional factor apropos inequality than whether a country has an autocratic or a democratic orientation. Economic institutions also seem to play an important role in alleviating inequalities within countries. Whether the government is functioning effectively and whether it has a robust fiscal and monetary policy seems to have stronger impact on inequality than regulatory quality. Education for all, a proxy for social institutions, has a strong redistributive power. Overall, legal institutions trump any other institutional categories in reducing inequalities in a country. On the other hand, middle income group is most likely to benefit from good functioning institutions than any other income group.

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