Inequality, Redistribution, and the Individualism-Collectivism Dimension of Culture
38 Pages Posted: 23 Jan 2017 Last revised: 4 Oct 2017
Date Written: January 19, 2017
This paper examines the relationship between culture and redistribution, focusing on the individualism-collectivism dimension of culture. Perhaps surprisingly, countries with more individualistic cultures have significantly greater income redistribution and lower levels of after-tax income inequality. This finding also holds when using instruments for individualism suggested by the literature on cross-cultural psychology, including historical pathogen prevalence and linguistic and genetic characteristics, to address reverse causality, and is driven by higher-income countries. In higher income countries, individualism is positively correlated with generalized trust and tolerance of outsiders and negatively correlated with belief in traditional gender roles. In contrast, in lower income countries, individualism is associated with a stronger emphasis on self-reliance and the benefits of competition.
Keywords: Inequality, Redistribution, Culture, Individualism, Collectivism, Social Norms, Values
JEL Classification: D30, D31, D63, Z10, O15
Suggested Citation: Suggested Citation