Democracy and income inequality: revisiting the long- and short-term relationship

Nikoloski, Zlatko

doi:10.5202/rei.v6i2.138

Cited by 8 publications

(7 citation statements)

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“…Empirical studies on the relationship between inequality and democracy similarly report varied results. Bollen and Jackman (1985), Li et al (1998), Tavares and Wacziarg (2001), Reuveny and Li (2003), Timmons (2010) and Nikoloski (2015) find no significant evidence that democracy is associated with lower inequality. Muller (1988Muller ( , 1995 however reports that there is an inverse causal association whereby a country that has high inequality at the start of democratization is more likely to revert to authoritarian rule, and thus democracy will only lower inequality if the country begins with low to intermediate levels of inequality.…”

Section: Fdi and Inequality In Sub-saharan Africamentioning

confidence: 87%

FDI and inequality in Sub-Saharan Africa: does democracy matter?

Gossel

2022

IJOEM

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PurposeThis paper investigates whether democracy plays a mediating role in the relationship between foreign direct investment (FDI) and inequality in Sub-Saharan Africa (SSA).Design/methodology/approachThe empirical analysis is conducted using fixed effects and system GMM (Generalised Method of Moments) on a panel of 38 Sub-Saharan African countries covering the period of 1990–2018.FindingsThe results find that FDI has no direct effect on inequality whereas democracy reduces inequality directly in both the short run and the long run. The sensitivity analyses find that democracy improves equality regardless of the magnitude of FDI, resource endowment or democratic deepening whereas FDI only reduces inequality once a moderate level of democracy has been achieved.Social implicationsThe results discussed above thus have four policy implications. First, these results show that although democracy has inequality reducing benefits, SSA is unlikely to significantly reduce inequality unless the region purposefully diversifies its trade and FDI away from natural resources. Second, the region should continue to expand credit access to reduce inequality and attract FDI. Third, policymakers should undertake reforms that will reduce youth inequality. Lastly, the region should focus on long-run democratic reforms rather than on short-run democratization to improve governance and investor confidence.Originality/valueAlthough there are existing studies that examine the association between FDI and inequality, FDI and democracy and democracy and inequality, this is the first study to explicitly examine the effect of democracy on the association between FDI and inequality in SSA, and the first study to separately consider the possible varied effects of contemporaneous democratization versus the long-run accumulation of democratic capital. In addition, rather than measure inequality by income alone, this study uses the more appropriate Human Development Index to account for SSA's sociological, education and income disparities.

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Section: Fdi and Inequality In Sub-saharan Africamentioning

confidence: 87%

FDI and inequality in Sub-Saharan Africa: does democracy matter?

Gossel

2022

IJOEM

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“…The study examines how democracy impacted the Gini index during 2010-2021 in 114 countries. The study sample was determined based on the availability of data and within the selected period in all the variables chosen in the model; the models can be summarized in (Lee C. , 2016), (Gradstein, Milanovic, & Ying, 2001), (Nikoloski, 2015) (Huang & Ho, 2018) as follow:…”

Section: Methodsmentioning

confidence: 99%

“…Various studies have produced diverse results: while (Bollen & Jackman, 1985) failed to identify such a relationship, (Li, Squire, & Zou, 1998) found limited evidence of a negative association between democracy and inequality, whereas (Rodrik, 1999) provided evidence linking democracy to a higher share of wages in GDP, leading to reduced inequality. Moreover, (Nikoloski, 2015) highlights the importance of refining the measurement of democracy to gain valuable insights into its relationship with income inequality. (Lee C. , 2016) identifies a robust correlation between democracy, the public sector, and income inequality.…”

Section: Introductionmentioning

confidence: 99%

The Effect of Democracy and Income Inequality (Gini Index)

Al-majali

2024

jjlps

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This article tests the potential impact of Democracy level on income inequality using static panel data analysis for a sampling of 114 countries during the period 2010-2021. Furthermore, the Global State of Democracy Indices represents democracy (DOM), and the Gini index (GINI) represents income inequality. Panel Unit Root Tests showed that all variables are stationary at the level, and the CD test indicated no cross-sectional dependency. Also, the Hausman Test supported a fixed effects model. The estimation result showed a significant negative relationship between the Gini index and the Democracy index (an increase in one basis point of DOM corresponds to a decrease of GINI by 0.487 basis points (decreasing the income inequality).

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“…Democracy and its squared term were included as cross-country literature lends support to the existence of an inverted U-shape association between political regime types and income inequalitythe so-called political Kuznets curve (Chong, 2004;Nikoloski, 2015). The explanation is simple: as societies become more democratic, economic wealth gravitates towards the working middle class, increasing income inequality between rural and urban population as a result.…”

Section: Methodsmentioning

confidence: 99%

Why Do Societies With Higher Average Cognitive Ability Have Lower Income Inequality? The Role of Redistributive Policies

Salahodjaev

Kanazawa

2017

J. Biosoc. Sci.

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SummaryPast studies suggest that, across nations, the average cognitive ability of a population is negatively associated with income inequality; societies with higher average cognitive ability tend to have lower levels of income inequality. However, it is not clear why. This paper proposes that social transfers from the wealthy to the poor may be a major mechanism by which some societies achieve lower income inequality than others, because more intelligent individuals may be more likely to have a preference for such transfers. Publicly available societal-level data were analysed in a series of multiple regression models. The empirical results in this study replicate the earlier finding that societies with higher cognitive ability have lower levels of income inequality, but the association is entirely mediated by social transfers. Social transfers therefore appear to be the primary mechanism by which societies with higher levels of cognitive ability achieve lower income inequality.

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Democracy and income inequality: revisiting the long- and short-term relationship

Cited by 8 publications

References 50 publications

FDI and inequality in Sub-Saharan Africa: does democracy matter?

FDI and inequality in Sub-Saharan Africa: does democracy matter?

The Effect of Democracy and Income Inequality (Gini Index)

Why Do Societies With Higher Average Cognitive Ability Have Lower Income Inequality? The Role of Redistributive Policies

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