Asymmetric Decentralization and Inequality

Recent political trends in Europe and the United States have highlighted the importance of rising spatial inequality for a range of political outcomes. Existing research on spatial inequality has emphasized that distributional conflict between more and less productive subnational regions may result in limited taxation and spending. We build upon this research to link spatial inequality and asymmetric decentralization to high concentrations of wealth and feeble efforts to tax the rich. We consider how institutions that codify asymmetric decentralization may interact with spatial inequalities to affect redistributive effort. We demonstrate a robust association between high spatial inequality and high concentrations of wealth and low taxation from progressive sources. At the same time, nations with asymmetric regional authority tend to have lower inequality and higher tax revenue on average, yet those with legislative malapportionment, a different form of regional asymmetric design, have far higher inequality and lower tax revenue. The interaction of inequalities and institutions also matters: when nations have both high spatial inequalities and asymmetrically decentralized institutions, they tend to have higher inequality and lower progressive taxation. We link these findings to comparative research on the origins and implementation of tax policy.