Does inequality harm democracy? An empirical investigation on the UK

This paper presents an empirical investigation about the effect of increasing economic inequality on some aspects of the quality of a democracy. The main novelty of the paper lies in its methodology: it applies to a single country - the UK – in a long run perspective. Using Eurobarometer data for the period 1974-2009, we select three questions and check whether an increase in inequality alters the answers to these questions, subject to other control variables. In particular, as indicators of the quality of democracy, we select the degree of Democracy-Satisfaction, the frequency of Political Discussion and Participation in Election. Another novelty is the use of several measures of inequality: the Gini coefficient, the Foster-Wolfson polarization index, the interdecile ratios P90/P10 and P90/P50, the shares of top and bottom 1%, 5% and 10% income. Inequality indices have been computed using two British household budget/expenditure surveys, i.e. the Family Expenditure Survey and the Family Resources Survey. Using an array of indicators allows us to disentangle what happens in the different parts of the income distribution and to avoid the dependence of the results on the choice of the indicator. The estimation is carried out estimating probit and ordered probit models. The main finding is that higher level of income inequality, no matter how it is measured, impacts negatively on citizens’ satisfaction with democracy and positively on their political discussion and intention to vote. This leads to the issue of limiting inequality as an engine of deterioration in the quality of democracy, and sustaining an active citizenship.