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Journal of Economic Perspectives: Vol. 27 No. 3 (Summer 2013)

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Why Hasn't Democracy Slowed Rising Inequality?

Article Citation

Bonica, Adam, Nolan McCarty, Keith T. Poole, and Howard Rosenthal. 2013. "Why Hasn't Democracy Slowed Rising Inequality?" Journal of Economic Perspectives, 27(3): 103-24.

DOI: 10.1257/jep.27.3.103

Abstract

During the past two generations, democratic forms have coexisted with massive increases in economic inequality in the United States and many other advanced democracies. Moreover, these new inequalities have primarily benefited the top 1 percent and even the top .01 percent. These groups seem sufficiently small that economic inequality could be held in check by political equality in the form of "one person, one vote." In this paper, we explore five possible reasons why the US political system has failed to counterbalance rising inequality. First, both Republicans and many Democrats have experienced an ideological shift toward acceptance of a form of free market capitalism that offers less support for government provision of transfers, lower marginal tax rates for those with high incomes, and deregulation of a number of industries. Second, immigration and low turnout of the poor have combined to make the distribution of voters more weighted to high incomes than is the distribution of households. Third, rising real income and wealth has made a larger fraction of the population less attracted to turning to government for social insurance. Fourth, the rich have been able to use their resources to influence electoral, legislative, and regulatory processes through campaign contributions, lobbying, and revolving door employment of politicians and bureaucrats. Fifth, the political process is distorted by institutions that reduce the accountability of elected officials to the majority and hampered by institutions that combine with political polarization to create policy gridlock.

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Authors

Bonica, Adam (Stanford U)
McCarty, Nolan (Princeton U)
Poole, Keith T. (U GA)
Rosenthal, Howard (NYU)

JEL Classifications

D31: Personal Income, Wealth, and Their Distributions
D63: Equity, Justice, Inequality, and Other Normative Criteria and Measurement
D72: Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
H23: Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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