When Religion Shapes Redistribution: Islamic Economic Provisions and Income Inequality

Mahmut Zeki Akarsu and Moamen Gouda

No 12657, CESifo Working Paper Series from CESifo

Abstract: This study examines how constitutionally embedded Islamic economic principles – declarations of an “Islamic Economy Provision,” “Islamic Alms/Zakat Provision,” and “Islamic Riba Provision” – affect income inequality in OIC (Organisation of Islamic Cooperation) countries over the period 1980–2019. Using novel disaggregated constitutional data (Gouda, 2026) merged with World Inequality Database measures, we estimate correlated random-effects panel models with Driscoll–Kraay standard errors. The results reveal heterogeneous post-2011 Arab Spring effects. Broad economy declarations and Islamic alms/zakat provisions are associated with higher top-10 and top-1 income shares and compressed middle and bottom shares in Arab states, suggesting elite capture in rentier contexts. By contrast, riba prohibitions reduce Gini coefficients and increase bottom-50 income shares across OIC countries. In non-Arab OIC countries, Islamic economy and alms provisions are associated with more egalitarian outcomes. The findings show that constitutional provisions operate as autonomous distributional forces, but their effects are mediated by textual specificity, implementation capacity, and political context. The policy implication is that enforceable institutional mechanisms are more likely than symbolic constitutional commitments to translate Islamic egalitarian norms into redistribution.

Keywords: Islamic constitutions; income inequality; Zakat; Riba prohibition; OIC countries (search for similar items in EconPapers)
JEL-codes: D31 K10 P48 Z12 (search for similar items in EconPapers)
Date: 2026
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