Electoral cycles in inequality

Economic policies play a fundamental role in reducing income inequality within countries, but such policies are subject to electoral cycles. This raises the question whether there exist electoral cycles in income inequality. In this paper, we focus on this phenomenon. We show comprehensive evidence that income inequality decreases in the years of elections. Moreover, electoral cycles in inequality are concentrated on close elections before which incumbent governments have stronger incentives to engage in policy actions, due to higher uncertainty about the election outcome. These findings point out that well-functioning democracies and increased political competition can be important factors in tackling income inequality within countries.