The extent of inequality in society is determined by the distribution of assets, the rates of returns on different assets, and government policy. All of these things are deeply political and reflect the balance of political power in society and the institutions to which this balance gives rise....

In this paper the author examines the forces that lead institutions to persist and change. He argues that the equilibrium institutions of society are the outcome of a political process which may be highly persistent and path dependent. This explains why patterns of underdevelopment are so...