Economic Journal, Forthcoming
39 Pages Posted: 11 May 2010 Last revised: 25 Sep 2010
Date Written: September 21, 2010
This paper revisits the relationship between inequality and redistribution in a panel of advanced OECD countries. Using panel data methods that hold constant a variety of determinants of redistributive spending, I find a non-monotonic relationship between pre-tax-and-transfer distribution of income and redistribution. Relative to mean income, a more affluent rich and middle class are associated with less redistribution and a richer poor class is associated with more redistribution. These results are consistent with a one dollar, one vote politico-economic equilibrium: When the income of a group of citizens increases, aggregate redistributive policies tilt towards this group's most preferred policies.
Keywords: Distribution, Inequality, Redistribution
JEL Classification: C23, D31, H50, P16
Suggested Citation: Suggested Citation
Karabarbounis, Loukas, One Dollar, One Vote (September 21, 2010). Economic Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1599135