Income inequality in authoritarian regimes: the role of political institutions and state capacity

Abstract

In recent decades, there has been an institutional shift in the literature on authoritarian regimes, with scholars investigating the role of political institutions, such as elections and political parties, in shaping regime stability and economic performance. However, scant attention has been devoted to the effect of political institutions on policy outcomes, and more specifically, on income inequality. This paper adds to this debate and sheds light on the role of formal and informal institutions, on the one hand, and state capacity, on the other, in influencing levels of income inequality in autocracies. We argue that, while the presence of elections and multiparty competition creates more favourable conditions for the adoption of redistributive policies, state capacity increases the likelihood of successfully implemented policy decisions aimed at reducing the level of inequality. Our empirical analysis rests on a time-series cross-sectional dataset, which includes around 100 countries from 1972 to 2014. The findings indicate that both political institutions and a higher level of state capacity lead to lower levels of income inequality in authoritarian contexts.

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“…Nevertheless, studies such as Chong and Gradstein (2007) have shown that an improvement in institutional quality can be conducive to a more equal income distribution. According to Panaro and Vaccaro (2023), a political system featured by the presence of elections and multiparty competition, provides a fertile ground for the adoption of redistributive policies (see also Pelke, 2020;Teo, 2020). On the other hand, state capacity increases the likelihood of successfully implemented redistributive policies (e.g., Panaro and Vaccaro, 2023).…”

“…According to Panaro and Vaccaro (2023), a political system featured by the presence of elections and multiparty competition, provides a fertile ground for the adoption of redistributive policies (see also Pelke, 2020;Teo, 2020). 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.…”