Corporate Wealth and Income Inequality

Abstract

We show Patrimonial Capitalism at the meso-level; using a panel of 105,970 publicly listed firms from 83 countries for 2000–2019, we find a positive effect of corporate-capital/labor-income ratio on income inequality of the hosting country, arguably via the channel of classical corporate financing (Khan et al., 2020). This effect is robust against endogeneity of government expenditure and economic development, alternative measurement of income inequality, and sample restrictions to high-income economies, OECD-member countries, and the pre-global financial crisis period. The empirical evidence is pioneering in terms of its generalizability across economies, owing to the employment of a diverse panel of firms operating in countries from every region and income level, and addressing issues of temporal inconsistency, imputation, cross-country standardization, and underreporting prevalent in contemporary data on the personal distribution of income and wealth.