Political Institutions and Income (Re-)Distribution: Evidence from Developed Economies
25 Pages Posted: 4 Sep 2013
Date Written: August 30, 2013
We discuss the effect of formal political institutions (electoral systems, fiscal decentralization, presidential and parliamentary regimes) on the extent and direction of income (re-)distribution. Empirical evidence is presented for a large sample of 70 economies and a panel of 13 OECD countries between 1981 and 1998. The evidence indicates that presidential regimes are associated with a less equal distribution of disposable incomes, while electoral systems have no significant effects. Fiscal competition is associated with less income redistribution and a less equal distribution of disposable incomes, but also with a more equal primary income distribution. Our evidence also is in line with earlier empirical contributions that find a positive relationship between trade openness and equality in primary and disposable incomes, as well as the overall redistributive effort.
Keywords: redistribution, formal institutions, fiscal decentralization, presidential and parliamentary regimes, electoral systems
JEL Classification: D310, H220, H110, H500, I380, P500
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