Electoral systems and income inequality: a tale of political equality

Abstract

The link between democracy and within-country income inequality remains an unresolved quest in the literature of political economy. To look into this debate, I propose exploring the implications of electoral systems, rather than political regimes, on income inequality. I surmise that proportional representation systems should be associated with lower income inequality than majoritarian or mixed systems. Further, I conjecture that the relationship between electoral systems and income inequality hinges on the de facto distribution of real political power, namely political equality. I use data on 85 countries covering the period 1960–2016 and specify models able to capture the persistence and mean reversion of income inequality. The estimates fail to significantly associate democracy with income inequality, and find other political institutions to significantly shape income inequality. The paper finds a robust association between more proportional systems and lower income inequality. However, this association depends on political equality. Changes towards proportional representation systems seem to lower income inequality at low and medium levels of political equality. Strikingly, instrumental variable estimates show that changes in electoral systems in political equal societies increases income inequality.

Income inequality and polity – an empirical analysis of political Kuznets curve

“…The smaller significance of this inverse U-shaped relation in the presidential system than in the parliamentary system is due to the characteristics of the parliamentary system in which a broader coalition of a majority of voters is typically pursued and thus a broader programs that benefit various groups of voters. This result is in line with Yi (2013) and Zuazu (2022).…”

“…Amri and Bouvet (2022) focused on the role of media to show that an increase in income inequality is negatively related to the vote share for the incumbent in the countries with free media. Zuazu (2022) focused on the electoral systems that forms political representation and showed that proportional representation lowers income inequality.…”

Democratising Democracy: Votes-Weighted Representation

“…Such vote weighting would not, however, correct for wasted votes for eliminated candidates or parties: to mitigate this requires actual transfers to next preferences, as under STV and its simplification, VWR. We expect our system will generally lead to coalition governments, and we and many others believe this is no bad thing, for multiple reasons which have been much discussed and debated (Bellamy, 2012), including better economic growth (Knutsen & Rasmussen, 2018) and less inequality (Zuazu, 2022). In any case, a single-party government (for example, under FPTP) is itself generally a broad, shifting coalition (albeit 'pre-formed', before the election, and voted on as such).…”

“…A criticism of PR is that it leads to coalition governments, and coalition-building can involve unpalatable deals behind closed doors -but that also happens within parties, including after elections. In any case, coalition building can improve governments (at least increasing the available talent pool), and may have a moderating influence, aligning them better to the overall population than FPTP does, stabilising policy-making (Colomer, 2012), boosting economic growth (Knutsen, 2011;Knutsen & Rasmussen, 2018) and reducing inequality (Zuazu, 2022). Another criticism of PR is that small parties can gain disproportionate power, by acting as 'king-makers'; this can be mitigated by sensible election thresholds, but all too often the price is large numbers of wasted votes.…”

Export product quality and inclusivity in developing countries

“…On the other hand, state capacity increases the likelihood of successfully implemented redistributive policies (e.g., Panaro and Vaccaro, 2023). Zuazu (2022) has shown that more proportional systems and lower income inequality, especially at low and medium levels of political equality. In contrast, changes in electoral systems in political equal societies are associated with a higher income inequality.…”