Political regime and income (re)distribution—Panel data analysis in 126 countries

Abstract

The study analyzes the relationship between the political regime and income (re)distribution. The unbalanced panel has 126 countries from 1988 to 2021, which is subdivided by Organization for Economic Co-operation and Development (OECD) membership. In non-OECD countries, the study finds that more democratic regimes and movements toward democracy on the political regime spectrum are associated with (1) increases in the market Gini coefficient, (2) increases in the net Gini coefficient, and (3) less absolute income redistribution. This suggests that democratic transitions may lead to greater income inequality, and these transitions do not necessarily correspond with more aggressive redistributive policies. In OECD countries, the political regime has an insignificant relationship with Gini coefficients and absolute income redistribution. The findings are robust to two political regime measures, namely, Polity5 and International Country Risk Guide, and multiple econometric models (e.g., Ordinary Least Squares, Fixed Effects, Generalized Least Squares, and Generalized Method of Moments). The study also explores the role of regime longevity, government stability, and institutional strength on income (re)distribution. Although the results are mixed, many models find that government stability and institutional strength are often associated with a decrease in Gini coefficients.