Alexander Yarkin (NRU HSE) will present his paper at NES CSDSI & HSE ICSID Research Seminar
NES Center for the Study of Diversity and Social Interactions and the International Center for the Study of Institutions and Development are pleased to invite to the next joint Research Seminar on Diversity and Development.
Alexander Yarkin (NRU HSE) will present a paper “Property rights and inequality in non-democratic regimes: theory and evidence”.
Date: October 20, 4.00 pm
Venue: 17 Malaya Ordynka, room 305
Working language of the seminar is English.
We would like to ask everyone who requires a pass to the HSE to register for the seminar until 1 p.m. of October 20 or write the e-mail to Olga Masyutina (stating your name, surname, your affiliation and contact e-mail address) until 1 p.m. October 20th.
We provide an explanation of how different size and wealth combinations of the ruling class (elite) in non-democratic regimes can account for the cross country variation in the strength of property rights protection. In a model with asymmetric rent-seeking contest and endogenous institutions we show that the impact of inequality on property rights is non-monotonous and conditional. First, it depends on why the inequality changes: because of aggregate wealth of the ruling class (elite) or its share in population. Second, the initial level of inequality, and the magnitude of its change, together determines the political regime: conflict (with unproductive rent-seeking behavior) or peace (social contract with strong institutions), and hence the institutional strength. Finally, the size of the ruling class, i.e. how limited is the access to power, is crucial. In particular, higher inequality corresponds to the emergence of conflict equilibrium. However, as long as the economy rests in conflict, the quality of property rights positively depends on the wealth of the elite, but negatively depends on the size of the elite class. These results explain why non-democratic countries with intermediate size of the ruling class may establish strong institutions under both high and low levels of inequality, while intermediate cases of elite’s wealth share correspond to worse institutions. Moreover, higher wealth inequality leads to lower conflict intensity. Consequently, in countries with extremely narrow ruling class lower inequality does not contribute to better institutions, but only increases conflict intensity. We use the results in order to interpret some historical cases of institutional development, including Russia, Latin American and Asian countries. The data analysis of new wealth inequality dataset confirms our results.Alexander Yarkin