Income Inequality, Capitalism and Ethno-Linguistic Fractionalization

KOF Working Paper No. 370

22 Pages Posted: 16 Jan 2015

See all articles by Jan-Egbert Sturm

Jan-Egbert Sturm

KOF Swiss Economic Institute, ETH Zurich; CESifo (Center for Economic Studies and Ifo Institute)

Jakob de Haan

University of Groningen - Faculty of Economics and Business; De Nederlandsche Bank; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: December 31, 2014

Abstract

We examine the relationship between capitalism and income inequality for a large sample of countries using an adjusted economic freedom index as proxy for capitalism and Gini coefficients based on gross-income as proxy for income inequality. Our results suggest that there is no robust relationship between economic freedom and income inequality. In addition, we analyze the relationship between income redistribution (measured by the ratio of the income distribution resulting from market processes and the income distribution after redistribution) and ethno-linguistic fractionalization. We find that the impact of ethno-linguistic fractionalization on income redistribution is conditional on the level of economic freedom: countries that have a high degree of fractionalization have less income redistribution, while capitalist countries that have a low degree of fractionalization have more income distribution.

Keywords: income inequality, redistribution, economic freedom, ethno-linguistic fractionalization

JEL Classification: D31, D63, F02, O11, O15

Suggested Citation

Sturm, Jan-Egbert and de Haan, Jakob, Income Inequality, Capitalism and Ethno-Linguistic Fractionalization (December 31, 2014). KOF Working Paper No. 370. Available at SSRN: https://ssrn.com/abstract=2550652 or http://dx.doi.org/10.2139/ssrn.2550652

Jan-Egbert Sturm (Contact Author)

KOF Swiss Economic Institute, ETH Zurich ( email )

Zurich
Switzerland

HOME PAGE: http://www.kof.ethz.ch

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, 81679
Germany

HOME PAGE: http://www.cesifo.de

Jakob de Haan

University of Groningen - Faculty of Economics and Business ( email )

PO Box 800
Groningen, 9700 AV
Netherlands
+31 0 50 3633706 (Fax)

De Nederlandsche Bank ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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