The effects of good governance on income inequality with an emphasis on political instability

Document Type : Research Paper

Authors

1 University of Mazandaran

2 Department of Economics/ University of Mazandaran

10.22051/ieda.2024.46408.1406

Abstract

In recent decades, the increase in income inequality, economic inefficiency, and lack of economic justice have played a significant role, especially in developing countries, in emphasizing the crucial role of governments in determining appropriate income distribution. Since the mid-1990s, along with the expansion of new institutionalism literature, good governance has been proposed as one of the essential components influencing the fair distribution of opportunities and incomes and the development of countries. In this study, we focus on the Middle East and North Africa (MENA) countries and examine the effects of good governance components on income inequality from 2008 to 2021, using the System Generalized Method of Moments (SGMM) approach. The estimated model results indicate that political instability, one of the most important components of governance, increases income inequality in MENA countries. On the other hand, the expansion of civil liberties and increased economic transparency can reduce income inequality in these countries. Examination of macro variables also shows that an increase in per capita income provides opportunities for reducing inequality, while an increase in the size of the government may be accompanied by an increase in income inequality.

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