The correlation between democracy and income inequality, as well as the direction of causation is still debated. In this paper, we conduct a dynamic panel data analysis for all 34 Organisation for Economic Co-operation and Development member states over the period 1960–2012 and illustrate a nonmonotonic relationship between inequality and democracy, as well as test the direction of causation by employing a noncausal homogeneity test in a panel Granger framework and the Dumitrescu and Hurlin noncausal heterogeneity test. We provide an explanation for the inverted U-shaped relation. In addition, we illustrate individual regression results for 12 exemplary Organisation for Economic Co-operation and Development countries and provide a concise illustration of the economic and political changes to which countries have been subjected while elaborating the effect of the underlying policies on democracy and income equality.

Democratization and inequality: Empirical evidence for the Organisation for Economic Co-operation and Development member countries

Edgar Javier Sanchez Carrera
2017

Abstract

The correlation between democracy and income inequality, as well as the direction of causation is still debated. In this paper, we conduct a dynamic panel data analysis for all 34 Organisation for Economic Co-operation and Development member states over the period 1960–2012 and illustrate a nonmonotonic relationship between inequality and democracy, as well as test the direction of causation by employing a noncausal homogeneity test in a panel Granger framework and the Dumitrescu and Hurlin noncausal heterogeneity test. We provide an explanation for the inverted U-shaped relation. In addition, we illustrate individual regression results for 12 exemplary Organisation for Economic Co-operation and Development countries and provide a concise illustration of the economic and political changes to which countries have been subjected while elaborating the effect of the underlying policies on democracy and income equality.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11576/2656334
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