Scandinavian Working Papers in Economics

Seminar Papers,
Stockholm University, Institute for International Economic Studies

No 726: Endogenous Constitutions

Davide Ticchi () and Andrea Vindigni
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Davide Ticchi: Department of Economics, University of Urbino and University Pompeu Fabra
Andrea Vindigni: Institute for International Economic Studies, Stockholm University, Postal: Stockholm University, S-106 69 Stockholm, Sweden

Abstract: We present a theory of the choice of alternative democratic constitutions, a majoritarian or a consensual one, in a n unequal society. A majoritarian democracy redistributes resources from the collectivity toward relatively few people, and has a relatively small government and low level of taxation. A consensual democracy redistributes resources toward a broader spectrum of social groups but also have a larger government and a higher level of taxation. A consensual system turns out to be preferred by the society when ex ante income inequality is relatively low, while a majoritarian system is chosen when income inequality is relatively high. Moreover, we obtain that consensual democracies should be expected to be ruled more often by center-left coalitions. Finally, our model also provides a new rationale, based on the endogeneity of the political system, of the positive or absent (rather than negative) association between equality and redistribution transpiring from the cross-sectional evidence of developed countries presented in some recent studies. Some historical and empirical evidence supporting our results is provided.

Keywords: Endogenous Constitutions; Consensual Democracy; Majoritarian Democracy; Inequality; Heterogeneity; Redistribution

JEL-codes: D31; D72; P16

96 pages, November 1, 2003

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