Solving the Robin Hood Paradox: Inequality, the Median Voter, and Redistribution

Abstract:     
Theories linking pre-tax, pre-transfer inequality to government redistribution posit that, among democracies, inegalitarian societies redistribute more than egalitarian ones. The empirical relationship between inequality and redistribution, however, is typically the opposite of the one expected, an incongruity scholars have come to know as the ‘Robin Hood’ paradox. We use new measures of support for redistribution and an instrumental variables methodology to systematically assess the effects of pre-government inequality on income redistribution in 47 countries. We show that contrary to prevalent theories, pretax, pre-transfer inequality systematically polarizes redistributive attitudes in the electorate, decreasing levels of redistribution. The findings explain the ‘Robin Hood’ paradox in studies of inequality and redistribution. In more egalitarian societies, citizens that pay taxes are also the ones who benefit from the transfers they generate, since equality in the distribution of income guarantees that both groups overlap in their membership. In countries with a relatively unequal market distribution of income, on the other hand, benefits for the poorer strata of the population come at the expense of everyone else. Lower levels of redistribution constitute a political equilibrium then in more inegalitarian societies, whereas higher redistribution devolves from more egalitarian distributions of income.

Keywords: Median voter, inequality, redistribution, panel data

JEL Classification: D30, D31, C23, C33, D60

working papers series