Essays On Inequality And Growth PDF Download

Institutions are a key determinant of economic growth. I explore the links of institutions with social conditions, particularly inequality and the distribution of power in society, and look at how ideology and communication affect institutional change. In Chapter 1, I analyze the effect of inequality on growth over different time-frames. Consistent with the notion that there is a trade-off between efficiency and fairness, I find that some inequality is good for growth when we look at the short-run. Yet, I also find that too much inequality is bad for growth implying that there exists an optimal level of inequality. Moreover, the trade-off between efficiency and fairness weakens over longer time-frames. In the long-run, the negative effect of inequality on growth tends to dominate. The reason seems to be that most of the positive effects of inequality are economic and take place in the short-run, while the negative social and political effects of inequality become key in the long-run. In Chapter 2, I present a theoretical model that analyzes the role of ideas in processes of institutional change, focusing on the particular case of democratization. Extensions of the franchise are only possible when ideological leaders generate ideas opposing the status-quo and when these ideas spread to other segments of society. Ideological differences help explain the occurrence of civil conflict. More importantly, they constitute a necessary condition for institutional change. Whether democratization occurs peacefully or violently is determined by the preferences of the incumbent elite and the ideological leaders. In Chapter 3, I conduct a laboratory experiment in which I explore the role of communication in a context similar to that presented in Chapter 2. I find that material interests opposed to cooperation limit the cooperative effect of communication and discussion in social dilemmas. Thus, while communication by an external agent with interests aligned with the cooperative outcome does promote cooperation, when the external agent has interests opposed to cooperation or when communication is contested by external agents with conflicting interests, the effect of communication disappears. This raises questions on the role of discussion as a mechanism to promote cooperation when there exist conflicting interests.