Inequality and Social Unrest: Analyzing the Link Between Economic Disparities and Civil Conflicts

Abstract

The paper analyzes the connection between economic inequality and social unrest with specific rivalry to political uncertainty, demonstrations, and civil war. Based on the panel data (balanced panel data of 80 countries of 2001-2020, the analysis uses descriptive statistics, correlation analysis, and multiple panel regression methods, such as two-way fixed effects OLS, negative binomial models, and instrumental variable (2SLS) estimation. The findings indicate that income inequality is a major cause of political instability whereas wealth inequality is more strongly linked to civil war. Nonetheless, the effects of inequality on the occurrence of protests are inaccurately estimated. Regardless of the model, the state capacity and the type of the democratic regime always diminish the unrest, which evidences their stabilizing effect. The instrumental variables are estimated to indicate possible endogeneity issues, yet causal associations are loosely determined. In general, the results suggest that economic inequality is a structural factor of unrest, the effect of which is heavily determined by the strength of the institutions. The paper highlights the significance of enhancing state capacity and redistributive policies in order to reduce the risks of conflict and ensure long-term social stability.