The long-run determinants of redistribution: evidence from a panel of 47 countries in 1967–2014

Redistribution is one of the most central functions of modern government. Against the backdrop of rising income inequality in many countries, policymakers and economists call for redistributive policies to address the rising inequality directly. Yet, there has been little systematic analysis of whether and how inequality influences redistribution and of the role of economic, political and institutional factors of redistribution. Our paper fills this important gap in the literature. To our knowledge, this is the first paper that systematically analyzes and presents evidence from a large panel of countries over 1967–2014 that high-income inequality is consistently associated with greater redistribution. Making it richer, evidence shows the role of economic factors such as trade openness, old age dependency, and financial development, and suggests that political institutions are important factors in understanding a cross-country variation in the size of redistribution. Extensive robustness checks confirm the results.