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The paper examines how legal, economic, political and social institutions fare with different measures of inequality in a cross section framework. We differentiate between institutions based on four categories which are legal, economic, political and social. Among legal institutions, rule of law and control for corruption have a stronger impact on inequality than voice and accountability. We find that countries which practice democracy are less prone to unequal outcomes especially when it comes to wage inequality and income inequality whereas autocracy is associated with higher level of wage inequalities but its impact on income inequalities are insignificant. Though under good economic management, autocracies may redistribute incomes from the richest to the poorest, more generally an autocratic set up violates the median voter hypothesis. The results also show that political stability is more sensitive to inequalities than democracy and autocracy which is to say that the countries which are politically stable also form more equal societies. Though in a cross section analysis, our results indicate average sample characteristics of countries chosen which neutralise the single country case sensitivities and thus may have captured the simple observational analogy that most democracies in the world are also the ones which are politically stable and economically efficient whereas most autocracies, unless they are lead by enlightened leadership eventually suffer from unstable or repressed political systems. Economic institutions also play an important role in alleviating global inequalities. Whether the government is functioning effectively and whether it has a robust fiscal and monetary policy seems to have stronger impact on inequality than regulatory quality. Education for all, a proxy for social institutions, has a strong redistributive power. Overall, political stability, control for corruption and rule of law trumps any other institutional proxy in reducing inequalities in a country. On the other hand, middle income group is most likely to benefit from good functioning institutions than any other income group. Once controlling for institutions, openness is associated with increased wage inequalities across nations. However the results for trade policy are mixed. Decrease in import taxes increase wage inequality, whereas decrease in export taxes has an egalitarian effect. The results are applicable only to a larger sample of developed and developing countries and highlight the bottle neck faced by both developing and developed countries in WTO talks which have not been successful as yet in further decrease in trade taxes. In case the situation prevails, the paper calls for more South-South trade which would enable developing countries to decrease the relative wage gaps among labour force.

The democratic peace hypothesis is compared with the liberal peace hypothesis, using the case of India and Pakistan. Econometric analysis suggests that trade between the two countries increases the chance of peace. Economic progress, combined with greater openness to international trade in general are more significant drivers of peace between nations like India and Pakistan, than are the independent contributions of a common democratic polity. So economic interdependence rather than politics is more likely to contribute to peaceful relations between India and Pakistan in the future.

Abstract We examine whether greater inter-state trade, democracy and reduced military spending lower belligerence between India and Pakistan, beginning with a theoretical model covering the opportunity costs of conflict in terms of trade losses and security spending, as well as the costs of making concessions to rivals. Conflict between the two nations is best understood in a multivariate framework where variables such as economic performance, integration with rest of the world, bilateral trade, military expenditure, democracy orientation and population are simultaneously considered. Our empirical investigation based on time series econometrics from 1950 to 2005 suggests that reduced bilateral trade, greater military expenditure, less development expenditure, lower levels of democracy, lower growth rates and less general trade openness are all conflict enhancing. Globalization, or a greater openness to international trade with the rest of the world, is the most significant driver of a liberal peace, rather than a common democratic orientation.

The authors examine whether greater inter-state trade, democracy and reduced military spending lower belligerence between India and Pakistan. They begin with theoretical models covering the opportunity costs of conflict in terms of trade losses and security spending, as well as the costs of making concessions to rivals. Conflict between the two nations can be best understood in a multivariate framework where variables such as economic performance, integration with rest of the world, bilateral trade, military expenditure, population are simultaneously taken into account. The authors' empirical investigation based on time series econometrics for the period 1950-2005 with causality tests suggests that reduced trade, greater military expenditure, less development expenditure, lower levels of democracy, lower growth rates and less general trade openness are all conflict enhancing. Moreover, there is reverse causality between bilateral trade, militarization and conflict; low levels of bilateral trade and high militarization are conflict enhancing, equally conflict also reduces bilateral trade and raises militarization. The authors also run forecasting simulations on 6 different VECM models. Globalization or a greater openness to international trade in general are more significant drivers of a liberal peace, rather than a common democratic political orientation suggested by the pure form of the democratic peace.

The aim of this paper is to examine the impact of increased trade on wage inequality in developing countries, and whether a higher human capital stock moderates this effect. We look at the skilled-unskilled wage differential. High initial endowments of human capital imply a more egalitarian society. When more equal societies open up their economies further, increased trade is likely to induce less inequality on impact because the supply of skills better matches demand. But greater international exposure also brings about technological diffusion, further raising skilled labour demand. This may raise wage inequality, in contrast to the initial egalitarian level effect of human capital. We attempt to measure these two opposing forces. We also employ a broad set of openness indicators to measure trade liberalization policies as well as general openness, which is an outcome, and not a policy variable. We further examine what type of education most reduces inequality. Our findings suggest that countries with a higher level of initial human capital do well on the inequality front, but human capital which accrues through the trade liberalization channel has inegalitarian effects. One explanation could be that governments in developing countries invest more in higher education at the expense of primary education in order to gain immediate benefits from globalization; thus becoming prone to wage inequality after increased international trade. Our results also have implications for the speed at which trade policies are liberalized, the implication being that better educated nations should liberalize faster.