The Equality Multiplier: How Wage Setting and Welfare Spending Make Similar Countries Diverge
The complementarity between wage setting and welfare spending can explain how almost equally rich countries differ in economic and social equality among their citizens. More wage equality increases the welfare generosity via political competition in elections. A more generous welfare state fuels wage equality via an empowerment of weak groups in the labor market. Together the two effects generate a cumulative process that adds up to a social multiplier explaining how equality multiplies. Using data on 18 OECD countries over the period 1976-2002 (determined by the availability of the generosity index of welfare spending) we test the main predictions of the model and identify a sizeable magnitude of the equality multiplier. We obtain additional support by using spending data to extend the panel up to 2007, and by applying another data set for the US over the period 1945-2001.
|Date of creation:||Apr 2012|
|Contact details of provider:|| Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany|
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lee, Woojin & Roemer, John E., 2006.
"Racism and redistribution in the United States: A solution to the problem of American exceptionalism,"
Journal of Public Economics,
Elsevier, vol. 90(6-7), pages 1027-1052, August.
- Woojin Lee & John E. Roemer, 2004. "Racism and Redistribution in the United States: A Solution to the Problem of American Exceptionalism," Cowles Foundation Discussion Papers 1462, Cowles Foundation for Research in Economics, Yale University.
- Alberto Alesina & Guido Cozzi & Noemi Mantovan, 2012. "The Evolution of Ideology, Fairness and Redistribution," Economic Journal, Royal Economic Society, vol. 122(565), pages 1244-1261, December.
- Alberto F. Alesina & Guido Cozzi & Noemi Mantovan, 2009. "The Evolution of Ideology, Fairness and Redistribution," NBER Working Papers 15587, National Bureau of Economic Research, Inc.
- Alberto Alesina & Guido Cozzi & Noemi Mantovan, 2009. "The evolution of ideology, fairness and redistribution," Working Papers 2009_29, Business School - Economics, University of Glasgow.
- Alberto Alesina & Guido Cozzi & Noemi Mantovan, 2012. "The Evolution of Ideology, Fairness and Redistribution," Working Papers 2012_05, Durham University Business School.
- Alberto Alesina & Guido Cozzi & Noemi Mantovan, 2009. "The Evolution of Ideology, Fairness and Redistribution," Working Papers 2009_05, Durham University Business School.
- Angel de la Fuente & Rafael Doménech, 2006. "Human Capital in Growth Regressions: How Much Difference Does Data Quality Make?," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 1-36, 03.
- ?gel de la Fuente & Rafael Dom?ech, "undated". "Human Capital In Growth Regressions: How Much Difference Does Data Quality Make?," UFAE and IAE Working Papers 446.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- de la Fuente, Angel & Doménech, Rafael, 2000. "Human Capital In Growth Regressions: How Much Difference Does Data Quality Make?," CEPR Discussion Papers 2466, C.E.P.R. Discussion Papers.
- Angel de la Fuente & Rafael Donénech, 2000. "Human Capital in Growth Regressions: How much Difference Does Data Quality Make?," OECD Economics Department Working Papers 262, OECD Publishing.
- Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 321-340.
- Richard Blundell & Stephen Bond, 1999. "GMM estimation with persistent panel data: an application to production functions," IFS Working Papers W99/04, Institute for Fiscal Studies.
- Dan Devroye & Richard B. Freeman, 2001. "Does Inequality in Skills Explain Inequality in Earnings Across Advanced Countries?," NBER Working Papers 8140, National Bureau of Economic Research, Inc.
- Dan Devroye & Richard B. Freeman, 2002. "Does inequality in skills explain inequality of earnings across advanced countries?," LSE Research Online Documents on Economics 20058, London School of Economics and Political Science, LSE Library.
- Dan Devroye & Richard Freeman, 2002. "Does Inequality in Skills Explain Inequality of Earnings Across Advanced Countries?," CEP Discussion Papers dp0552, Centre for Economic Performance, LSE.
- Dani Rodrik, 1997. "Trade, Social Insurance, and the Limits to Globalization," NBER Working Papers 5905, National Bureau of Economic Research, Inc.
- Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877.
- Henry S. Farber, 2011. "Job Loss in the Great Recession: Historial Perspective from the Displaced Workers Survey, 1984-2010," Working Papers 1309, Princeton University, Department of Economics, Industrial Relations Section..
- Rafael Di Tella & Juan Dubra, 2010. "A note on Fairness and Redistribution," Harvard Business School Working Papers 11-059, Harvard Business School.
- 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.
- 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.
- Branko Milanovic, 2000. "The Median Voter Hypothesis, Income Inequality and Income Redistribution: An Empirical Test with the Required Data," LIS Working papers 256, LIS Cross-National Data Center in Luxembourg.
- Erica L. Groshen, 1991. "Sources of Intra-Industry Wage Dispersion: How Much Do Employers Matter?," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 869-884. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp6494. 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: (Mark Fallak)
If references are entirely missing, you can add them using this form.