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Income Inequality, Capitalism and Ethno-Linguistic Fractionalization

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  • Jan-Egbert Sturm
  • Jakob de Haan
  • Jakob de Haan

Abstract

We examine the relationship between capitalism and income inequality for a large sample of countries using an adjusted economic freedom index as proxy for capitalism and Gini coefficients based on gross-income as proxy for income inequality. Our results suggest that there is no robust relationship between economic freedom and income inequality. In addition, we analyze the relationship between income redistribution (measured by the ratio of the income distribution resulting from market processes and the income distribution after redistribution) and ethno-linguistic fractionalization. We find that the impact of ethno-linguistic fractionalization on income redistribution is conditional on the level of economic freedom: countries that have a high degree of fractionalization have less income redistribution, while capitalist countries that have a low degree of fractionalization have more income distribution.

Suggested Citation

  • Jan-Egbert Sturm & Jakob de Haan & Jakob de Haan, 2015. "Income Inequality, Capitalism and Ethno-Linguistic Fractionalization," CESifo Working Paper Series 5169, CESifo.
    • Handle: RePEc:ces:ceswps:_5169
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    References listed on IDEAS

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    1. John Carter, 2007. "An Empirical Note on Economic Freedom and Income Inequality," Public Choice, Springer, vol. 130(1), pages 163-177, January.
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    3. Bennett, Daniel L. & Vedder, Richard K., 2013. "A Dynamic Analysis of Economic Freedom and Income Inequality in the 50 U.S. States: Empirical Evidence of a Parabolic Relationship," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 43(1).
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    6. Klaus Desmet & Ignacio Ortuño-Ortín & Shlomo Weber, 2009. "Linguistic Diversity and Redistribution," Journal of the European Economic Association, MIT Press, vol. 7(6), pages 1291-1318, December.
    7. Frederick Solt, 2009. "Standardizing the World Income Inequality Database," LIS Working papers 496, LIS Cross-National Data Center in Luxembourg.
    8. Dollar, David & Kleineberg, Tatjana & Kraay, Aart, 2016. "Growth still is good for the poor," European Economic Review, Elsevier, vol. 81(C), pages 68-85.
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    More about this item

    Keywords

    income inequality; redistribution; economic freedom; ethno-linguistic fractionalization;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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