Abstracts Economics

Inequality, institutions and growth

by Marcelo Tokman

the paper explores the relationship betweent the distribution of wealth and income, the institutional environment and the growth rate of an economy. A formal model is developed in which the members of society determine, through a political process, the extent of property rightsprotection provided by its institutions. We show that the level of protection is a fuction of the decisive agent´s property share, and that for both a political process requiring a ´strict consensus´and for one consisting in ´majority voting´, improvements in the distribution of property result in more secureproperty rights. The model also predicts that, since increased property rights protection reduces the adverse effects of socio-political instability on savings and investment, improvement in the distribution of wealth and income also lead to higher growth rates.