DEMOCRATIC VALUES AND INEQUALITY, OR DEMOCRATIC INEQUALITY? A CASE OF THE FORMER SOCIALIST COUNTRIES

There is a lot of research on the relation between political democracy and income distribution and the correlation between economic growth and presence of a democratic regime based of cross country data but it has failed to fi nd any robust relationship between inequality and democracy (Bollen and Jackman, 1985; Li et al, 1998). Or, to be precise, Milanovich and Gradstein came to the conclusion that -- there is a relatively weak effect of democracy on inequality (seldom statistically signifi cant when controlled for other factors); the effect is particular weak for presidential systems (parlamentary systems are more pro-equality). Relations between economic growth and inequality remains unclear. Bigsten and Levin (2001) argue that countries that have been successful in terms of economic growth are also more likely to have been successful in reducing poverty. There is no constant relationship between growth and changes in inequality. On the contrary, Clarke (2001) stressed that inequality is negatively correlated with growth. However, the correlation between inequality and growth is not dependent upon whether the government is a democracy or a non-democracy. Boix (2000) suggested that the positive impact of economic growth in introduction of democracy is conditional upon the presence of organisations that allow for credible commitments among the poor. The situation becomes even more complicated if the experience of transitional economies are taken into account-- Milanovich and Gradstein state that while democracy and inequality increased practically in all transitional economies, higher increases in democracy were associated with lower increases in inequality. In other parts of the world the conclusion drawn from the studies is just the opposite-- the increase in democracy corresponds to decrease in inequality. This phenomenon gave rise to a number of studies. The analysis of the relevant literature made Gradstein et al (2001) to suggest that democratization affects inequality indirectly. The aim of this paper is to have a closer look at that such indirect factors might be and how they are likely to form links between democracy and inequality. This is not to say that there is no link between democracy and inequality at all rather that such relationship is by no way simple