A Theory of Civil Conflict and Democracy in Unequal Societies

Abstract

This paper examines the endogenous choice between democracy and conflict in a scenario with different social classes in terms of income inequality and with parties representing each of the two social classes. We consider how the change in economic inequality between the poor and rich people affects the sustainability of democracy against conflict and how it impacts the equilibrium levels of tax rate and public expenditure under democracy. We show that the increase in economic inequality destabilizes of democracy since the poor hardly has the incentive to sustain the democracy Further the increase is positively associated with the equilibrium levels of both the tax rate and public expenditure. Therefore, we successfully provide theoretic justification for the fact that sufficiently large economic inequality decreases the possibility of a self-enforcing democracy.