Inequality and Participative Democracy: A Self‐Reinforcing Mechanism

• Published date: 01 March 2020
• Author: Ioannis Theodossiou,Alexandros Zangelidis
• Date: 01 March 2020
• DOI: http://doi.org/10.1111/roiw.12401

© 2018 Internationa l Association for Res earch in Incom e and Wealth

74

INEQUALITY AND PARTICIPATIVE DEMOCRACY:

A SELF-REINFORCING MECHANISM

by IoannIs TheodossIou and alexandros ZangelIdIs*

Centre for Eu ropean Labour Mark et Research,Unive rsity of Aberdeen

During the last three decades, a notable increase in economic inequality is observed, accompanied by a

decline in people’s engagement in politics and electoral participation. This is an unsatisfactory phenom-

enon as it undermines the legitimacy of democratic representation. This negative association is pro-

duced by a complex salient mechanism. This study aims at investigating this issue. Using data from a

panel of 28 OECD and European countries, this paper identifies a two-way causal relationship between

inequality and political participation. The results show that greater income inequality alienates and

discourages people from engaging with common affairs, thus leading to lower political participation.

Yet, lower electoral participation leads towards a less equitable distribution of income. Hence, this

study reveals a self-reinforcing mechanism where the unequal distribution of income leads to political

exclusion, which in turn leads to more inequality.

JEL Codes: D31, D70, E60

Keywords: income inequality, political participation, redistribution

“So long as the people do not ca re to exercise the ir freedom, t hose

who wish to tyra nnize w ill do so; for tyrants ar e active and ardent,

and will de vote themselves in t he name of any number of gods, reli-

gious and other wise, to put shackles upon sle eping men.”

Voltaire

1. InTroducTIon

The shape of the i ncome distribution has cha nged markedly since 1980, with

substantial ga ins in real i ncome at the top outpa cing much more modest g ains

among middle i ncome earne rs. The econom ic models of Romer (1975), Roberts

(1977) and Meltzer and Richard (1981) suggest th at rising econo mic inequa lity

leads those at th e lower rungs of the income ladder to d emand greater redi stribu-

tion. Hence, it would be exp ected that governments, r esponding to the increa sed

Note: We are grateful to the editor and two anonymous referees for constructive comments and

suggestions. We also thank the seminar participants at the University of Aberdeen and the University

of Dundee for valuable comments on an earlier version of the paper. All remaining errors are ours.

*Correspondence to: Alexandros Zangelidis, Economics, Centre for European Labour Market

Research, Edward Wright Building, University of Aberdeen, Aberdeen, AB24 3QY, UK. (a.zangelidis@

abdn.ac.uk)

Review of Inc ome and Wealth

Series 66 , Number 1, March 2020

DOI : 10.1111 /ro iw.1 24 01

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Review of Income and Wealth, Series 66, Number 1, March 2020

75

© 2018 Internationa l Association for Res earch in Incom e and Wealth

political pr essure, would increa se social transfers an d welfare provisions with the

aim to achi eve a more egalitar ian distribution of income. However, their pre dic-

tion that inequa lity should induc e higher welfar e spending and h igher redi stri-

bution is not supporte d by empirica l evidence (Perot ti, 1993; 1996; Ramchar an,

2010). Indeed , it has been well docu mented that economic i nequality is inc reasing

dramatica lly among citiz ens in many advan ced countri es (Piketty, 2014), while

welfare generosit y has been steadily de clining.

One strand of the literature explains why increasing economic inequality is

not accompanied by policies of greater redistribution (Bénabou, 2000; Moene and

Wallerstein, 2001; Barth and Moene, 2012). This literature assumes that public

opinion plays a key role in the formulation of welfare policies. Thus, opinions of

the public are found to be homogeneous and to follow a similar path over time.

Furthermore, policy preferences of those at the lower and upper part of the

income distribution are found to be highly correlated (Soroka and Wlezien, 2008;

Ura and Ellis, 2008). Building on this, Kelly and Enns (2010) show that economic

inequality is self-reinforcing because both the rich and poor become more con-

servative as inequality is rising. They argue that people in the top of the income

distribution prefer lower redistribution, but with increasing inequality poor people

also become discontented and less willing to pay higher taxes to finance a more

generous welfare state. The homogeneity assumption in people’s response among

different rungs of the income ladder and the conservative shift in preferences as

economic inequality widens can help explain why inequality has been steadily ris-

ing since the 1980s. Furthermore as Barth et al. (2015) suggest, it is not only public

sentiment that shifts to more conservativism in response to rising inequality, but

also party politics on welfare issues have moved to the right, strengthening the

impact of inequality. Both their theoretical model and empirical findings highlight

that left-wing political parties shift their political manifestos to the right and to less

generous welfare spending.

A parallel to the above strand of the literature highlights that unequal demo-

cratic representation and a class bias in the political agenda favors the preferences

of the individuals in the highest rungs of income distribution (Gilens, 2005; 2011;

Bartels, 2008). Bartels (2008) proposes that economic inequality becomes self-re-

inforcing as “increasing economic inequality may produce increasing inequality in

political responsiveness, which in turn produces public policies that are increasingly

detrimental to the interests of poor citizens, which in turn produces even greater

inequality, and so on.” (p. 286). Gaventa (1980) and Lukes ([1974] 2005) argue per-

suasively that inequality induces frustration with the political process and thence

apathy for those at the lower rungs of the income distribution. Hence, if economic

inequality affects who votes, then election outcomes may produce a biased sample

of preferences towards those who vote, namely the higher rungs of the income dis-

tribution. “Democracy, thus constituted, does not even attain its ostensible object,

that of giving the powers of government in all cases to the numerical majority. It

does something very different: it gives them to a majority of the majority; who may

be, and often are, but a minority of the whole” (Mill, 1861; p.124),

This highlights that economic inequality is related to political participation

and therefore to the democratic legitimacy. This is an outcome of the fact that the

increasingly unequal distribution of income and wealth is hindering the