Although the relationship between democratic rule and income inequality has received important attention in recent literature, the evidence has been far from conclusive in the developing world context. In this paper we explore if redistributive effect of democratic rule could be conditional on state capacity. Previous literature has outlined that the pre-existing state infrastructural power might be necessary for redistributive policies under democratic rule.  By contrast to that intuitive view, we argue that democratic rule combined with high state infrastructural power produce higher levels of income inequality, through their positive effect on investor confidence, which favors income concentration to the top. Democracy offers protection of private property rights from arbitrary government involvement, benefiting economic elites and the business sector. High infrastructural power, in turn, provides the preconditions for the functioning of capitalist market economy through legal and administrative institutions, which enhances  private contracting among economic agents. We also argue that democratic rule reduces inequality under low state capacity, due to its potential to foster confidence-harming socio-economic conflicts in these settings. We find empirical support for these claims using data from 110 industrial and developing countries between 1970-2015.