ABSTRACT
This chapter explores the possible impact of economic inequality on governance in contemporary settings in a much fuller way. It examines the theoretical or causal mechanisms through which inequality can undermine good governance. The chapter describes Two-stage least squares regressions that rely on exogenous determinants of economic inequality. It explains the need to control for a range of variables that, like economic development, may be associated with both governance and inequality and, consequently, whose omission is likely to bias the estimated impact of the latter. The view of petty corruption emerging from the efforts of relatively poor individuals to meet their basic needs can be expanded upon by considering differences in time preferences with respect to income. The discussion so far suggests that economic inequality may be inimical to good governance. Probably the most important confounding variable is the level of economic development. Democracy can impact on economic inequality.
