ECONOMIC OPENNESS, DEMOCRACY AND INCOME INEQUALITY NEXUS IN OIC COUNTRIES

Abstract

This study examines the nexus among economic openness, democracy and income inequality in OIC countries. The panel data has been used over the period 1990 to 2019 and the ARDL technique has been applied for empirical analysis. Two models have been specified to investigate the association among economic openness, democracy and income inequality at disaggregated and aggregated levels. In the first model of disaggregated analysis, the results show that the square of GDP, Democracy, trade, and foreign direct investment are negatively and significantly related to income inequality of OIC countries while other variables GDPG and poverty have a positive association. GDPG turns out statistically significant, but PHCR is insignificant.  In the second model of aggregate analysis, GDPG, democracy, and economic openness have a negative association with income inequality but poverty headcount ratio and GDPG square have a positive association with inequality. The study has also suggested some policies to reduce inequality.