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