Democracy and trends in wealth inequality: a global empirical study

Abstract

Effective democracy relies on the political equality of individuals, which is in turn influenced by wealth inequality levels. However, within-country wealth inequality has reached extreme levels in the world today and continues to rise. Conclusive information on whether democracies are effectively reducing or limiting wealth inequality as compared to non-democracies is currently lacking. Here I show that generally countries with high levels of democracy are not any more likely to reduce or limit wealth inequality than non-democratic states, using a rigorous methodology and data from 146 countries. Conversely, I also find that two specific aspects related to democracy, strong and independent elected regional government and widespread respect for civil liberties, do function to reduce or limit wealth inequality. My results demonstrate that democracy is in need of certain reforms to both increase political equality and limit wealth inequality. Besides providing empirical support for the practice of federalism as well as policies protecting civil liberties for the disadvantaged, this thesis also examines reasoning for why democracy may not be functioning to reduce or limit wealth inequality, and relevant policy recommendations are highlighted.