State-Owned Enterprises, Political Ideology, and Inequality

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C. Karayalcin, V. Avsar and M.Ulubasoglu. Economics and Politics, November 2013, v. 25, n.3, pp. 387-410.

State-owned enterprises continue to play a considerable role in many economies. In this study we empirically investigate the connections between these enterprises and inequality as mediated through political ideology. Using cross-country data on the relative size of the state-owned enterprise sector, we find strong empirical support for an inverted U-shaped relationship between its size and income inequality. We also find strong evidence that left-wing (vis-a-vis right-wing) governments are associated with a larger state-owned enterprise sector in countries with higher inequality. This result is robust to using cross-sectional vs. panel data, different identification strategies, and various controls.

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