August 2007

IZA DP No. 2984: Are All Democracies Equally Good? The Role of Interactions between Political Environment and Inequality for Rule of Law

slightly revised version published in: Economics Letters, 2008, 99 (3), 552-556

Using cross-country data, we find evidence for a significant negative interaction effect between democracy and inequality in determining the quality of growth-promoting institutions like rule of law. Democracy is associated with institutions of higher quality when inequality is lower.