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Redistribution through a "Leaky Bucket". What explains the Leakages?

  • Fabio Padovano

    (CREM-CNRS and Centre Condorcet for Political Economy, University of Rennes 1, France and DIPES, Università Roma Tre, Italy)

  • Gilberto Turati

    (Department of Economics and Statistics University of Torino, Italy)

This paper empirically examines to what extent political factors explain different performances in income redistribution in countries that vary in terms of size of the public sector, tax systems, political institutions and governance. In line with the theory, we use the difference in the ex ante and ex post Gini indices of income inequality as the measure of the degree of redistribution achieved. The estimates show that, holding the share of public spending on GDP constant, parliamentary systems and democracies achieve greater redistribution, while electoral district size, government cohesion, union influence and perceived corruption reduce redistribution. The disaggregation of spending items reveals that while transfers and interest payments do not influence redistribution, provision of public services, mainly health and education do, but the number of bureaucrats involved in such provisions has a negative impact. Within revenues, taxes on income redistribute more than other forms of levies.

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Paper provided by Condorcet Center for political Economy in its series Economics Working Paper from Condorcet Center for political Economy at CREM-CNRS with number 2012-03-ccr.

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Date of creation: Apr 2012
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Handle: RePEc:tut:cccrwp:2012-03-ccr
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  1. 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.
  2. Daniela Sonedda & Gilberto Turati, 2005. "Winners and Losers in the Italian Welfare State: A Microsimulation Analysis of Income Redistribution Considering In-Kind Transfers," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 64(4), pages 423-464, December.
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  5. Luiz de Mello & Erwin R. Tiongson, 2006. "Income Inequality and Redistributive Government Spending," Public Finance Review, , vol. 34(3), pages 282-305, May.
  6. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
  7. Milanovic, Branko, 2010. "Four critiques of the redistribution hypothesis: An assessment," European Journal of Political Economy, Elsevier, vol. 26(1), pages 147-154, March.
  8. Arnaud Lefranc & Nicolas Pistolesi & Alain Trannoy, 2006. "Inequality of opportunities vs. inequality of outcomes: Are Western societies all alike?," Working Papers 54, ECINEQ, Society for the Study of Economic Inequality.
  9. 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.
  10. 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 914-27, October.
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  12. Allan Meltzer & Scott Richard, 1983. "Tests of a rational theory of the size of government," Public Choice, Springer, vol. 41(3), pages 403-418, January.
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