IDEAS home Printed from https://ideas.repec.org/a/kap/jecinq/v15y2017i1d10.1007_s10888-016-9340-8.html
   My bibliography  Save this article

Inequality, ethnic diversity, and redistribution

Author

Listed:
  • Christian Houle

    () (Michigan State University)

Abstract

Seminal political economy models from Meltzer and Richard, among others, theorize that, in democracies, more inequality should lead to more redistribution. Most country-level empirical studies find weak support for this prediction. This paper makes two contributions to this debate. First, I identify some of the key shortcomings of previous tests and provide a new empirical analysis that corrects for these limitations. Using a dataset covering 89 developed and developing democracies, I find that inequality is associated with more redistribution. Second, I show that inequality’s effect on redistribution is weaker in democracies in which the poor – defined as the people with income below the median – are divided along ethnic lines than in those in which they are ethnically unified. Taken together, these results suggest that although economic inequality increases redistribution, the magnitude of the relationship is conditional on how inequality interacts with other social cleavages, such as ethnicity.

Suggested Citation

  • Christian Houle, 2017. "Inequality, ethnic diversity, and redistribution," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 15(1), pages 1-23, March.
  • Handle: RePEc:kap:jecinq:v:15:y:2017:i:1:d:10.1007_s10888-016-9340-8
    DOI: 10.1007/s10888-016-9340-8
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10888-016-9340-8
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Roland Benabou & Efe A. Ok, 2001. "Social Mobility and the Demand for Redistribution: The Poum Hypothesis," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 447-487.
    2. Shelton, Cameron A., 2007. "The size and composition of government expenditure," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2230-2260, December.
    3. Francesco Scervini, 2012. "Empirics of the median voter: democracy, redistribution and the role of the middle class," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 10(4), pages 529-550, December.
    4. William Robert Reed, 2015. "On the Practice of Lagging Variables to Avoid Simultaneity," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 77(6), pages 897-905, December.
    5. Erzo F. P. Luttmer, 2001. "Group Loyalty and the Taste for Redistribution," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 500-528, June.
    6. Lindert,Peter H., 2009. "Growing Public," Cambridge Books, Cambridge University Press, number 9780521529174, August.
    7. Valentino Larcinese, 2007. "Voting over Redistribution and the Size of the Welfare State: The Role of Turnout," Political Studies, Political Studies Association, vol. 55(3), pages 568-585, October.
    8. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422, December.
    9. Francisco Rivera-Batiz & Myeong-Su Yun & Ira Gang, 2002. "Economic Strain, Ethnic Concentration and Attitudes Towards Foreigners in the European Union," Departmental Working Papers 200214, Rutgers University, Department of Economics.
    10. Jo Thori Lind, 2003. "Fractionalization and the Size of Government," CESifo Working Paper Series 1000, CESifo.
    11. Lars P. Feld & Jan Schnellenbach, 2013. "Political Institutions and Income (Re-)Distribution: Evidence from Developed Economies," CESifo Working Paper Series 4382, CESifo.
    12. Scheve, Kenneth & Stasavage, David, 2006. "Religion and Preferences for Social Insurance," Quarterly Journal of Political Science, now publishers, vol. 1(3), pages 255-286, July.
    13. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
    14. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
    15. Lind, Jo Thori, 2007. "Fractionalization and the size of government," Journal of Public Economics, Elsevier, vol. 91(1-2), pages 51-76, February.
    16. Milanovic, Branko, 2000. "The median-voter hypothesis, income inequality, and income redistribution: an empirical test with the required data," European Journal of Political Economy, Elsevier, vol. 16(3), pages 367-410, September.
    17. Luiz de Mello & Erwin R. Tiongson, 2006. "Income Inequality and Redistributive Government Spending," Public Finance Review, , vol. 34(3), pages 282-305, May.
    18. Lupu, Noam & Pontusson, Jonas, 2011. "The Structure of Inequality and the Politics of Redistribution," American Political Science Review, Cambridge University Press, vol. 105(2), pages 316-336, May.
    19. Martin Wittenberg, 2015. "Problems with SWIID: the case of South Africa," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(4), pages 673-677, December.
    20. Erik Lindqvist & Robert Östling, 2013. "Identity and redistribution," Public Choice, Springer, vol. 155(3), pages 469-491, June.
    21. Gudrun Østby, 2008. "Polarization, Horizontal Inequalities and Violent Civil Conflict," Journal of Peace Research, Peace Research Institute Oslo, vol. 45(2), pages 143-162, March.
    22. Bassett, William F. & Burkett, John P. & Putterman, Louis, 1999. "Income distribution, government transfers, and the problem of unequal influence," European Journal of Political Economy, Elsevier, vol. 15(2), pages 207-228, June.
    23. Baldwin, Kate & Huber, John D., 2010. "Economic versus Cultural Differences: Forms of Ethnic Diversity and Public Goods Provision," American Political Science Review, Cambridge University Press, vol. 104(4), pages 644-662, November.
    24. Stephen Jenkins, 2015. "World income inequality databases: an assessment of WIID and SWIID," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(4), pages 629-671, December.
    25. Lars Feld & Jan Schnellenbach, 2014. "Political institutions and income (re-)distribution: evidence from developed economies," Public Choice, Springer, vol. 159(3), pages 435-455, June.
    26. Lane Kenworthy & Jonas Pontusson, 2005. "Rising Inequality and the Politics of Redistribution in Affluent Countries," LIS Working papers 400, LIS Cross-National Data Center in Luxembourg.
    27. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    28. Romer, Thomas, 1975. "Individual welfare, majority voting, and the properties of a linear income tax," Journal of Public Economics, Elsevier, vol. 4(2), pages 163-185, February.
    29. Frederick Solt, 2009. "Standardizing the World Income Inequality Database," LIS Working papers 496, LIS Cross-National Data Center in Luxembourg.
    30. Lindert, Peter H., 1996. "What Limits Social Spending?," Explorations in Economic History, Elsevier, vol. 33(1), pages 1-34, January.
    31. José Cheibub & Jennifer Gandhi & James Vreeland, 2010. "Democracy and dictatorship revisited," Public Choice, Springer, vol. 143(1), pages 67-101, April.
    32. Moene, Karl Ove & Wallerstein, Michael, 2001. "Inequality, Social Insurance, and Redistribution," American Political Science Review, Cambridge University Press, vol. 95(4), pages 859-874, December.
    33. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    34. Frederick Solt, 2009. "Standardizing the World Income Inequality Database," Social Science Quarterly, Southwestern Social Science Association, vol. 90(2), pages 231-242, June.
    35. Perotti, Roberto, 1996. "Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-187, June.
    36. Segura-Ubiergo,Alex, 2012. "The Political Economy of the Welfare State in Latin America," Cambridge Books, Cambridge University Press, number 9781107410664, December.
    37. Andrea Brandolini & Anthony B. Atkinson, 2001. "Promise and Pitfalls in the Use of "Secondary" Data-Sets: Income Inequality in OECD Countries As a Case Study," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 771-799, September.
    38. Holger Stichnoth & Karine Van der Straeten, 2013. "Ethnic Diversity, Public Spending, And Individual Support For The Welfare State: A Review Of The Empirical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 27(2), pages 364-389, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Benjamin Elsner & Jeff Concannon, 2020. "Immigration and Redistribution," Working Papers 202024, School of Economics, University College Dublin.
    2. Graham A. Davis, 2020. "Large-sample evidence of income inequality in resource-rich nations," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 33(1), pages 193-216, July.
    3. Pleninger, Regina & Sturm, Jan-Egbert, 2020. "The effects of economic globalisation and ethnic fractionalisation on redistribution," World Development, Elsevier, vol. 130(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jecinq:v:15:y:2017:i:1:d:10.1007_s10888-016-9340-8. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Springer Nature Abstracting and Indexing). General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.