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Do more unequal countries redistribute more? does the median voter hypothesis hold?

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  • Milanovic, Branko

Abstract

The median voter hypothesis is important to endogenous growth theories because it provides the political mechanisms through which voters in more unequal countries re-distribute a greater proportion of income and thus (it is argued), by blunting incentives, reduce the country's growth rate. But he hypothesis was never properly tested because of lack of data on the distribution of (pre-tax and transfer) factor income across households, and hence on the exact amount of gain by the poorest quintile of poorest half. The author tests the hypothesis using t9 observations drawn from household budget surveys from 24 democracies. The data strongly support the hypothesis that countries with more unequal distribution of factor income redistribute more in favor of the poor - even when the analysis controls for the older people's share in total population (that is, for pension transfers). The evidence on the median voter hypothesis is much weaker. The author does find that middle-income groups gain more (or lose less) through redistribution in countries whereinitial (factor) income distribution is more unequal. This regularity evaporates, however, when pensions are dropped from social transfers and the focus is strictly on the more re-distributive social transfers.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2264.

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Date of creation: 31 Dec 1999
Date of revision:
Handle: RePEc:wbk:wbrwps:2264

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Related research

Keywords: Income; Services&Transfers to Poor; Economic Theory&Research; Poverty Impact Evaluation; Environmental Economics&Policies; Inequality; Poverty Impact Evaluation; Economic Theory&Research; Safety Nets and Transfers; Services&Transfers to Poor;

References

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  1. Rodrik, Dani & Alesina, Alberto, 1994. "Distributive Politics and Economic Growth," Scholarly Articles 4551798, Harvard University Department of Economics.
  2. Alesina, Alberto & Perotti, Roberto, 1994. "The Political Economy of Growth: A Critical Survey of the Recent Literature," World Bank Economic Review, World Bank Group, vol. 8(3), pages 351-71, September.
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Citations

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Cited by:
  1. Verónica Amarante & Gioia de Melo, 2004. "Crecimiento económico y desigualdad: una revisión bibliográfica," Documentos de Trabajo (working papers) 04-02, Instituto de Economia - IECON.
  2. Francesco De Sinopoli & Giovanna Iannantuoni, 2009. "On the expect of ideology in proportional representation systems," Working Papers 160, University of Milano-Bicocca, Department of Economics, revised Apr 2009.
  3. Berthold, Norbert & Thode, Eric, 2000. "Umverteilung in der Mittelschicht: notwendiges Übel im Kampf gegen Armut?," Wirtschaftswissenschaftliche Beiträge 34, Julius-Maximilians-Universität Würzburg, Lehrstuhl für Volkswirtschaftslehre, insbes. Wirtschaftsordnung und Sozialpolitik.
  4. Gradstein. Mark & Milanovic, Branko, 2002. "Does Liberte = Egalite ? A survey of the empirical links between democracy and inequality with some evidence on the transition economies," Policy Research Working Paper Series 2875, The World Bank.
  5. Christophe Ehrhart, 2009. "The effects of inequality on growth: a survey of the theoretical and empirical literature," Working Papers 107, ECINEQ, Society for the Study of Economic Inequality.
  6. International Monetary Fund, 2003. "Income Inequality and Redistributive Government Spending," IMF Working Papers 03/14, International Monetary Fund.
  7. Enrico Longoni & Filippo Gregorini, 2009. "Inequality, Political Systems and Public Spending," Working Papers 159, University of Milano-Bicocca, Department of Economics, revised Apr 2009.
  8. Mark Gradstein & Branko Milanovic, 2000. "Does Liberté = Egalité? A Survey of the Empirical Evidence on the Links between Political Democracy and Income Inequality," CESifo Working Paper Series 261, CESifo Group Munich.
  9. Yemtsov, Ruslan, 2003. "Quo Vadis? Inequality and Poverty Dynamics across Russian Regions," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).

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