Abstract

In this paper we analyze the role of political institutions on the distribution resources in political bargaining processes. We use laboratory experiments and study 3 different political institutions in order to address the consequences (in terms of social welfare and equality) of democracy and direct participation in the institutions. In a non-democratic institution (Dictatorship), a dictator is randomly chosen to determine how to distribute a fixed quantity of resources. This baseline treatment is compared to two alternative democratic institutions: (i) Indirect Democracy, in which the proposer is randomly chosen in every round; y (ii) Direct Democracy, in which all subjects make a distribution proposal in each period. Our results indicate that democratic institutions achieve higher levels of social welfare and equality, because the participants internalize and avoid the conflict, rejecting less proposals when perceiving the system as more just. These gains are not necessarily associated with the degree of participation in the democratic institutions.

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