Economic inequality, culture, and governance quality

Abstract

We review work that has linked economic inequality and culture to governance quality. We start with contributions that have considered the relationship between inequality and governance from a long-run perspective. This historical perspective yields a range of insights and helps identify the deep drivers of specific cultural traits that relate to both economic inequality and governance in contemporary societies. We then survey work that has linked inequality and culture to governance in present-day settings. We identify the complexity of the relationships with causality between any pair of these variables running both ways. These causal patterns, in turn, imply that countries may end up in either a good equilibrium characterized by lower economic inequality, the “right” culture and good governance, or a bad equilibrium described by greater inequality, the “wrong” culture and bad governance. We conclude with a range of policy implications