Endogenous Constitutions

We present a theory of the choice of alternative democratic constitutions, a majoritarian or a consensual one, in an unequal society. A majoritarian democracy redistributes resources from the collectivity toward relatively few people, and has a relatively small government and low level of taxation. A consensual democracy redistributes resources toward a broader spectrum of social groups but also has a larger government and a higher level of taxation. We show that a consensual system turns out to be preferred by society when ex ante income inequality is relatively low, while a majoritarian system is chosen when income inequality is relatively high. We also obtain that consensual democracies should be expected to be ruled more often by center-left coalitions while the right should have an advantage in majoritarian constitutions. The implications for the relationship between inequality and redistribution are discussed. Historical evidence and a cross-sectional analysis support our results.