Publication Date: November 2000
Revision Date: September 2001
Many suppose that democracy is an ethos which includes, inter alia, a degree of economic equality among citizens. In contrast, we conceive of democracy as ruthless political competition between groups of citizens, organized into parties. We inquire whether such competition, which we assume to be concerned with distributive matters, will engender economic equality in the long run.
The society consists of an inﬁnite sequence of generations, each comprised of adults and their children. Adults care about household consumption, and the future wages of their children, which are determined by educational policy. A given generation is characterized by the distribution of wages earned by its adults. Parties form and propose policies to redistribute income among households, and to invest in the education of children; the educational policy that is victorious determines the distribution of wages in the next generation of adults.
A political equilibrium concept is proposed which determines two parties endogenously, and their proposed policies in political competition. One party wins the election (stochastically). This process determines a sequence of wage distributions across the generations, and we ask: Under what conditions does the wage distribution tend to one of equality?
We show that, under a technological assumption that appears to hold empirically, there is no assurance that wage equality is eventually achieved, but if certain `social norms` hold, which restrict the space of acceptable political policies, then equality is eventually achieved. We suggest, moreover, that the social norms in question will tend to hold, the more technologically developed the democracy is.
Political economy, dynamics, education, equality
JEL Classification Codes: D72, D63
See CFP: 1163