This chapter develops a formal model connecting inequality to regime change. We first spell out assumptions that redistributivist models share, and then offer our alternative assumptions about actors, their interests, and their likely actions in different contexts. The resulting theory connects land and income inequality to competition between elites from different economic sectors for control over the state – and lays out the likely conditions for such competition to lead to regime change.
Redistributivist models rely on five problematic assumptions: (1) a one-sector economy, (2) two-group politics between rich and poor, (3) the absence of taxation and expropriation under autocracy, (4) particularly high taxation and spending in unequal democracies, and (5) a disconnect between groups' economic resources and their likelihood of prevailing in struggles over political regimes. Although some redistributivist models alter one or more of these assumptions, all share several, and all share the core assumption that democratization is driven by conflict between the rich and the poor.
Our model alters each assumption. First, we consider an economy with two economic sectors, with differential growth rates. Second, our model has three groups: the incumbent elite, a rising economic elite, and the masses. Third, we presume that taxation under autocracy is regressive, transferring resources to the incumbent elites from the other groups. Fourth, we suggest that rising economic elites may prefer partial democracy, which may have lower taxation than autocracy. And finally, instead of assuming that the likelihood of a group prevailing is exogenous, we assume that this probability depends on the ratio of resources between groups, meaning that higher-income groups are more likely to win.
After laying out assumptions, we develop our theoretical model in two steps. We first explain the economic fundamentals that determine inequality, and then we explore how various forms of inequality impact the likelihood of expropriation and redistribution under different political regimes and, thus, how these same factors shape disenfranchised groups' incentives to rebel or not (“democratization from below”) as well as incumbent elites' incentives to either repress their opponents or to relinquish control over the regime (“democratization from above”).