The Impact of Democracy on Distribution of Income in a Selection of Member Countries of OECD and Member States of the Islamic Conference (2001-2014)

Document Type: Original Research


1 Master of Economics, University of Isfahan, Bukan, Iran

2 Master of Economics, Payame Noor University, Bukan, Iran


As a socioeconomic index, inequality in distribution of income and wealth is considered as a marginally sensitive political variable that is simultaneously highly prone to being affected by political structures. On this basis, the recent process of democratization has yielded in occurrence of a series of economic evolutions among which, the most disputed one is redistribution of income and inequality of the former and wealth. The objective of the present research is to investigate and compare the relation between democracy and distribution of income in a selection of member countries of OECD and those of The Islamic Conference between 2001 and 2014. The econometric method used in this research is panel data regression. Results indicate that democracy has a significant impact on GINI coefficient among member countries of OECD and The Islamic Conference. In terms of reduction GINI coefficient, democracy has a greater impact on member countries of OECD compared to those of The Islamic Conference. This shows that compared to member countries of The Islamic Conference, member countries of OECD are more sensitive to democracy. In other words in such societies the right for having a voice expands to the lower classes and economic decision makings are removed from the mere dominance of the few wealthy. In this case, the voters are those who belong to classes of lower incomes and respectively, the tax rate that determines the amount of redistribution and is obtained through polling, increases and resultantly redistribution increases. This is followed by improved living conditions among the poor and the needy people.


 Acemoglu, D. and Robinson, J._A. (2006), “Economic Origins of Dictatorship and Democracy”, Cambridge University Press.
Alavuotunki, K and Pirttil, J., (2014) "Income inequality and the tax structure: Evidence from developed and developing countries", Journal of Comparative Economics, No. 14 PP. 254–262.
Bargain, O., Dolls, M., Immervoll, H., Neumann, D., Peichl, A., Pestel, N., & Sebastian, S., (2011), “Tax Policy and Income Inequality in the U.S., 1978-2009: A Decomposition Approach.” IZA Discussion Paper No. 5910.
Bargain, Taylor, Lanis,. (2012). Determinants of transfer pricing aggressiveness: Empirical evidence from Australian firms, Journal of Contemporary Accounting & Economics, Volume 9, Issue 2, December 2013, Pages 136–150.
Bassett, William F. & John P. Burkett & Louis, Putterman (1999): Income Distribution, government transfers and the problem of unequal influence, European Journal of Political Economy, Vol.24, pp. 207-228.
Bastagli, K; L, Blouin; R, Guay; (2012); "Does Tax Aggressiveness Reduce Financial Reporting Transparency". American Economic Journal: Applied Economics, Vol. 1, No.2, PP. 53–63.
Boustan, J., Balakrishnan, K. & W. Guay (2013), "Does Tax Aggressiveness Aeduce Financial Reporting Transparency?", University of Pennsylvania, Available at:
Comeau, L. (2003), “Democracy and Growth: A Relationship Revisited”, Eastern Economic Journal, 29, pp. 1–21.
Davoodi, Hamid R. and Gupta, Sanjeev and Chu, Ke-young, (2000) "Income Distribution and Tax and Government Social Spending Policies in Developing Countries" (March 2000). IMF Working Paper, Vol. 12  pp. 1-48.
Gung-shen, Jian.(2002). Democracy and growth: An alternative empirical approach. BOFIT Discussion Papers, No. 13.
Gupta, D. K; Madhavan, M.C & Blee, A. (2009). Democracy, economic growth and political instability: an integrated perspective. Journal of Socio-Economics, 27(5): 587-611.
Haan, J._D. and Sturm, J._E. (2003), “Does More Democracy Lead to Greater Economic Freedom? New Evidence for Developing Countries”, European Journal of Political Economy, 19, pp. 547–563.
Hewitt, Christopher (2008), The Effect of Political Democracy and Social Democracy on Equality in Industrial Societies: A Cross-National Comparison; American Sociological Review, Vol. 42, pp. 450-464.
Kurzman, C., R. Werum and E. Burkhart (2002). "Democracy`s Effect on Economic Growth: A Pooled Time Series Analysis, 1951-1980", Studies in Comparative International Development, No. 1.
Libman, A. (2009), “Democracy, Size of Bureaucracy, and Economic Growth: Evidence from Russian Regions”, Center for Doctoral Studies in Economics, University of Mannheim, D-68131, Mannheim, Germany.
Milanovic, Branko (2000), The Median Voter Hypothesis, Income Inequality, and Income Distribution: An Empirical Test with the Required Data, European Journal of political Economics,Vol.21, pp. 112-424.
Muller, Dennis C.& Thomas Stratman (2003), The economic effect of democratic participation, journal of public Economic, Vol.32, pp. 1214-1244.
Qureshi, M. G. and Ahmed, E. (2012), “The Interlink ages between Democracy and Per Capita GDP Growth: A Cross Country Analysis”, PIDE Working Papers, No. 85.
Ross, M. (2006). "Is democracy good for The Poor?" American Journal of Political Science, No. 4.
Siegal, J., Weinstein, M. and Halperin, M. (2004), “Why Democracies Excel”, Foreign Affairs, 83_ (5), pp. 57–71.
Tropeano, Domenica and Elisabetta, Michetti (2008), Exchange rate policy and income Distribution in an Open Developing Country, Macereta.
Vega-Gordillo, M., & Álvarez-arce, J. L.(2003). Economic growth and freedom: a causality study. Cato Journal, 23 (2):199-214.