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Inequality and Redistribution: Evidence from U.S. Counties and States, 1890-1930

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  • Rodney Ramcharan

    (International Monetary Fund)

Abstract

Does economic inequality affect redistributive policy? This paper turns to U.S. county data on land inequality over the period 1890 to 1930 to help address this fundamental question in political economy. Redistributive policy was primarily decided at the local level during this period, making county-level data particularly informative. Examining within-state variation also reduces the potential impact of latent institutional and political variables. The paper also uses a variety of identification strategies, including historic variables as well as county weather and crop characteristics, as instruments for land inequality. The evidence consistently suggests that greater inequality is significantly associated with less redistribution. This negative relationship is especially large in heavily rural counties, where concentrated landownership implied that landed elites also controlled the majority of economic production. (c) 2010 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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  • Rodney Ramcharan, 2010. "Inequality and Redistribution: Evidence from U.S. Counties and States, 1890-1930," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 729-744, November.
    • Handle: RePEc:tpr:restat:v:92:y:2010:i:4:p:729-744
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    Cited by:

    1. Cinnirella, Francesco & Hornung, Erik, 2016. "Landownership concentration and the expansion of education," Journal of Development Economics, Elsevier, vol. 121(C), pages 135-152.
    2. Raghuram G. Rajan & Rodney Ramcharan, 2011. "Land and Credit: A Study of the Political Economy of Banking in the United States in the Early 20th Century," Journal of Finance, American Finance Association, vol. 66(6), pages 1895-1931, December.
    3. Bertocchi, Graziella & Dimico, Arcangelo, 2014. "Slavery, education, and inequality," European Economic Review, Elsevier, vol. 70(C), pages 197-209.
    4. Leah Platt Boustan & Fernando Ferreira & Hernan Winkler & Eric Zolt, 2010. "Income Inequality and Local Government in the United States, 1970-2000," NBER Working Papers 16299, National Bureau of Economic Research, Inc.
    5. Erik Hornung, 2012. "Human Capital, Technology Diffusion, and Economic Growth - Evidence from Prussian Census Data," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 46, January.
    6. Vollrath, Dietrich, 2008. "Agrarian Structure and Endogenous Financial System Development," MPRA Paper 11538, University Library of Munich, Germany.
    7. Campante, Filipe R., 2011. "Redistribution in a model of voting and campaign contributions," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 646-656, August.
    8. Brice Fabre, 2018. "The Impact of Local Income Inequality on Public Goods and Taxation: Evidence from French Municipalities," PSE Working Papers halshs-01721825, HAL.
    9. Vollrath, Dietrich, 2008. "Wealth Distribution and the Provision of Public Goods: Evidence from the United States," MPRA Paper 11534, University Library of Munich, Germany.
    10. Loukas Karabarbounis, 2011. "One Dollar, One Vote," Economic Journal, Royal Economic Society, vol. 121(553), pages 621-651, June.
    11. Francesco Cinnirella & Erik Hornung, 2016. "Land Inequality, Education, and Marriage: Empirical Evidence from Nineteenth-Century Prussia," CESifo Working Paper Series 6072, CESifo Group Munich.
    12. Barth, Erling & Moene, Karl Ove, 2012. "The Equality Multiplier: How Wage Setting and Welfare Spending Make Similar Countries Diverge," IZA Discussion Papers 6494, Institute for the Study of Labor (IZA).
    13. Andersson, Jens & Berger, Thor, 2016. "Elites and the Expansion of Education in 19th-century Sweden," Lund Papers in Economic History 149, Lund University, Department of Economic History.
    14. Raghuram G. Rajan & Rodney Ramcharan, 2016. "Constituencies and Legislation: The Fight Over the McFadden Act of 1927," Management Science, INFORMS, vol. 62(7), pages 1843-1859, July.
    15. Oyvat, Cem & Tekgüç, Hasan, 2017. "Double squeeze on educational development: land inequality and ethnic conflict in Southeastern Turkey," Greenwich Papers in Political Economy 16812, University of Greenwich, Greenwich Political Economy Research Centre.
    16. Kosec, Katrina, 2014. "Relying on the private sector: The income distribution and public investments in the poor," Journal of Development Economics, Elsevier, vol. 107(C), pages 320-342.
    17. Logan, Trevon D. & Parman, John M., 2017. "The National Rise in Residential Segregation," The Journal of Economic History, Cambridge University Press, vol. 77(01), pages 127-170, March.
    18. Baten, Joerg & Juif, Dácil, 2014. "A story of large landowners and math skills: Inequality and human capital formation in long-run development, 1820–2000," Journal of Comparative Economics, Elsevier, vol. 42(2), pages 375-401.
    19. Deininger, Klaus & Yadav, Vandana, 2011. "Long-term Effects of Land Reform on Human Capital Accumulation: Evidence from West Bengal," WIDER Working Paper Series 082, World Institute for Development Economic Research (UNU-WIDER).
    20. Bricker, Jesse & Ramcharan, Rodney & Krimmel, Jacob, 2014. "Signaling Status: The Impact of Relative Income on Household Consumption and Financial Decisions," Finance and Economics Discussion Series 2014-76, Board of Governors of the Federal Reserve System (U.S.).
    21. Philipp Ager, 2013. "The Persistence of de Facto Power: Elites and Economic Development in the US South, 1840-1960," Working Papers 0038, European Historical Economics Society (EHES).
    22. Vollrath, Dietrich, 2013. "Inequality and school funding in the rural United States, 1890," Explorations in Economic History, Elsevier, vol. 50(2), pages 267-284.
    23. Martin Fiszbein, 2017. "Agricultural Diversity, Structural Change and Long-run Development: Evidence from the U.S," NBER Working Papers 23183, National Bureau of Economic Research, Inc.

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