Suchergebnisse

A strand of the political economy literature emphases the negative effect of income inequality on growth and poverty, which materialises through redistribution. The theoretical expectation is that high inequality would lead to higher redistribution via the collective action of the median voter. Most of the empirical literature testing the redistribution hypothesis has been conducted in the context of industrialised economies. This paper examines this hypothesis with specific reference to sub-Saharan Africa, a region characterised by high levels of income inequality and limited redistribution. We adopt an instrumental variable approach to unpack the determinants and plausible mechanisms underpinning this relationship. In the analysis, we account for the effect of omitted top income earners in income inequality estimates, given their weight in the shape of the income distribution and their influence in redistributive policies. Overall, we find a positive relationship between inequality and redistribution, especially among middle-income countries. Further examination reveals that the abundance of natural resource rents seem to be the driving force affecting tax policy choices, which in turn exacerbates income inequity and undermines progressive redistribution. Thus, our results do not provide strong evidence to support the propositions of the median voter theorem but instead, seem to aligned more closely to the predictions of the multiple steady states hypothesis.