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

Authors

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

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

Abstract

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.

Keywords


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