Income inequality and democracy

Income inequality reduces support for democracy

Do the rich and poor have different conceptions of democracy? Does the level of economic inequality within a country matter in support of democracy? Using data from 58 countries in the World Values Survey (WVS), a recent study found that income level is a direct driver of an individual’s conception of democracy; the higher the economic position in society, the closer that individual’s conception of democracy is to the status quo government in their country, and this is regardless of whether that status quo is democratic or autocratic. This study also modeled commitment to democracy, and found that a gap in support of democracy exists between rich and poor individuals, and this gap is largest in societies with high income inequality while being quite small in societies where income is more evenly distributed. These results agree with other research suggesting that increased income inequality is associated with more authoritarian attitudes and less support for democratic views. 

Democracy reduces income inequality directly in both the short and long runs 

Using data from 38 Sub-Saharan African countries over the period 1990-2018, a recent study investigated whether democracy matters as a mediating factor in the relationship between foreign direct investment (FDI) and income inequality. The results show that FDI had no direct effect on inequality, but that democracy reduces inequality directly in both the short and long term. FDI only reduces inequality once a moderate level of democracy has been achieved. The authors theorize that more democratic governments are more responsive to their citizen’s needs, and therefore set policies into place that improve the life chances and living standards of their population, while foreign investors can negotiate directly with elites in societies with less democratic governments and the foreign investment may be felt unevenly.