Does Clientelism Affect Income Inequality? Evidence from Panel Data

Abstract

This paper studies the determinants of income inequality in a panel of countries to provide empirical evidence to the relationship between income inequality and clientelism. Using different panel data techniques, especially group mean fully modified OLS estimator, and also allowing for control variables, cross-sectional heterogeneity and cross-sectional dependence, we find that in the long run, clientelism exerts a significant negative effect on income equality. The overall results of the study have implications for fiscal management strategies and political regime choice.