March 30, 2016
Zakat is the third pillar of Islam. It is not only a way to aid or subsidy people who need it, but it is an influential tool for economic activity and social cohesion since it is considered as the core of the Islamic financial system and its primordial tool for income redistribution. Therefore, and regarding to the experiences of some Islamic countries which apply Zakat institutionally; it is crucial to know the real impact of applying Zakat on income disparities in these countries. Hence, this study aims at assessing the efficiency of the institutional application of Zakat in reducing income inequality in the countries under study. To do that, we develop and estimate econometric models relating income distribution variables to the collected Zakat revenues. This empirical study covers a panel of seven Muslim countries over the period 1990-2013. Such an exercise has not been done by previous studies, and therefore constitutes the fundamental novelty of our study. Keywords: Zakat revenues, Income distribution, Inequality indicators, Direct and indirect effects, Econometric models.