Exploring the relationship between socio-economic inequality, political instability and economic growth Why do we know so little?

Abstract

The hypothesis that socio-economic inequality has a detrimental effect on economic growth by breeding political instability has been subject to empirical investigation for decades. However, the numerous studies in the field have yielded highly different conclusions, and still no agreement has been reached as to what the relationship between these variables really looks like. This study investigates why empirical studies have given such diverging results. By using several different measures both of socio-economic inequality, political instability and economic development it examines whether differences in methods and measurement can explain the variation in previous findings. It is revealed that the effect of socio-economic inequality upon political instability is dependent on which measures are used, and that the effect of instability upon economic development varies between different analytical models. The study thus shows that conclusions about the relationship between these phenomena are not robust to alternative measurement. A possible explanation of why previous empirical studies have reported such diverging findings is therefore that socio-economic inequality and political instability have been measured in different ways, or that different analytical models have been used.