Redistribution, income inequality, and conflict in developing countries: Is there any causality?

Abstract

Amid growing conflict in developing countries, this study investigates the effect of income redistribution on internal conflict across 93 developing countries. The study analyzes panel data from 1990 to 2021. The study explores whether absolute redistribution effectively reduces instances and risks of civil disorder, political violence, terrorism, and civil wars. Findings reveal that greater market income inequality is associated with heightened internal conflict, whereas enhanced income redistribution leads to diminished internal conflict levels. However, the study identifies a non-linear pattern where the benefits of redistribution decrease beyond certain thresholds, suggesting the potential of diminishing returns. Granger causality tests further indicate a bidirectional relationship between income redistribution and internal conflict, suggesting a potentially vicious circle where each variable exacerbates the other. The findings highlight the need for redistributive economic policies to foster societal peace in developing countries.