“Institutions and Inequality”

Abstract

This paper investigates the hypothesis that the association between property rights institutions and economic performance is weaker in countries with high social divisions, as measured in terms of ethnic fractionalisation and income inequality. The results of the empirical estimations support this hypothesis and indicate that it could have some relevance for explaining identified regional variation in the institutional parameter. Moreover, they point to the importance of carefully evaluating the extent to which the institutions measure used captures the institutional framework applying for a broad cross-section of the population.