The Determinants of Redistribution Around The World

• Published date: 01 March 2020
• Author: Markus Jäntti,Jukka Pirttilä,Risto Rönkkö
• Date: 01 March 2020
• DOI: http://doi.org/10.1111/roiw.12406

© 2018 Internationa l Association for Res earch in Incom e and Wealth

59

THE DETERMINANTS OF REDISTRIBUTION AROUND THE WORLD

by Markus Jäntti

Swedish In stitute for Social Resea rch,Stockholm Univ ersity

Jukka Pirttilä*

University of Hels inki, VATT, and UNU-WIDER

AND

risto rönkkö

UNU-WIDER and University of Tampere

This paper reexamines the determinants of redistribution in light of improved data and methods rela-

tive to earlier literature. In particular, we use the latest version of the UNU-WIDER’s Income Inequality

Database to have the best available estimates of both pre- and post-redistribution inequality for the

largest set of countries and periods. We tackle head-on problems related to model specification that risk

generating large biases in estimates because of mechanical associations between the dependent and

explanatory variables. The results suggest that the bias in the earlier work can be substantial. The

descriptive analysis highlights, in addition, how scarce the data are when it comes to information about

the extent of redistribution in developing countries.

JEL Codes: H11, O11, O47

Keywords: inequality, redistribution, cross-country analysis

1. introduction

Inequality has become a key economic and social policy concern in recent

years. Researchers have documented rising top income and wealth shares, people

have protested in the streets about increasing inequality, and researchers and poli-

cymakers alike have increasingly started to worry about the potential negative con-

sequences of inequality for social distress and economic performance.1

Much of the discussion is quite vague about the type of inequality that is

being debated. Top income shares, for example, mostly refer to market income (or

factor income) inequality, whereas what should matter the most for welfare

1A seminal paper foreseeing this interest is Atkinson (1997).

Note: We are grateful to the editor and two anonymous referees as well as seminar audiences at

HECER-WIDER Development Lunch, the Summer Meeting of the Finnish Economists, and the

Seventh Meeting of the Society for the Study of Economic Inequality for useful comments. Support

from the Academy of Finland (Grant 268082) is gratefully acknowledged.

*Correspondence to: Jukka Pirttilä, Economicum, Arkadiankatu 7, PL 1279, 00101 Helsinki,

Finland (jukka.pirttila@helsinki.fi).

Review of Inc ome and Wealth

Series 66 , Number 1, March 2020

DOI : 10.1111 /roi w.124 06

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