Title

Income distribution, government transfers, and the problem of unequal influence

Document Type

Article

Date of Original Version

1-1-1999

Abstract

Several papers in the literature have posited that inequality hinders growth by leading to high distorting taxes and transfers. We retest whether inequality and transfers are positively linked, using several alternative definitions and data sets including new income data assembled by the World Bank. We correct an error in a result of Persson and Tabellini [Persson, T., Tabellini, G., 1994. Is inequality harmful for growth? American Economic Review, 84, 600-621]; we show that the relationship across mixed country samples is, if anything, negative; and we confirm Perotti's [Perotti, R., 1996. Growth, income distribution, and democracy: what the data say, Journal of Economic Growth, 1, 149-187.] finding that this relationship weakens or disappears when population structure (proportion over 65) is controlled for. We also introduce two alternative theories of the distribution-transfers link that allow political influence to be a function of income.

Publication Title

European Journal of Political Economy

Volume

15

Issue

2

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