From kings and dictators to liberal democracies: How political regimes affect income inequality

Sammanfattning: This study looks at how political regimes affect income inequality. Levels of inequality differ a lot between countries but tend to be very stable over time in a country. This is in line with explanations of inequality that focus on structural factors, of which political regimes could be one. The model used in this study is based on the selectorate theory, which states that the size of the group that is necessary to keep a leader or government in power affects the decision making process via political constraints. This group is called the winning coalition and in democracies this group consists of the voters necessary to win. In authoritarian regimes, however, this group is smaller and includes e.g. military leaders that have the power to keep a leader in office. To test the relationship between political regimes and income inequality a sample of more than a 100 countries over the period 1960-2015 is used. Moreover, the impact of the presence of natural resources and foreign aid on this relationship is studied. The findings support the conclusion that political regimes are an important factor in explaining income inequality. For the influence of natural resources and foreign aid no supporting evidence was found. Overall, the selectorate theory can add important insights on how political factors affect inequality by providing a strong theoretical foundation. However, higher quality data is necessary to flly test the predictions empirically.