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Do more unequal countries redistribute more? does the median voter hypothesis hold?

Author

Listed:
  • Milanovic, Branko
Abstract
The median voter hypothesis is important to endogenous growth theories because it provides the political mechanisms through which voters in more unequal countries re-distribute a greater proportion of income and thus (it is argued), by blunting incentives, reduce the country's growth rate. But he hypothesis was never properly tested because of lack of data on the distribution of (pre-tax and transfer) factor income across households, and hence on the exact amount of gain by the poorest quintile of poorest half. The author tests the hypothesis using t9 observations drawn from household budget surveys from 24 democracies. The data strongly support the hypothesis that countries with more unequal distribution of factor income redistribute more in favor of the poor - even when the analysis controls for the older people's share in total population (that is, for pension transfers). The evidence on the median voter hypothesis is much weaker. The author does find that middle-income groups gain more (or lose less) through redistribution in countries whereinitial (factor) income distribution is more unequal. This regularity evaporates, however, when pensions are dropped from social transfers and the focus is strictly on the more re-distributive social transfers.

Suggested Citation

  • Milanovic, Branko, 1999. "Do more unequal countries redistribute more? does the median voter hypothesis hold?," Policy Research Working Paper Series 2264, The World Bank.
    • Handle: RePEc:wbk:wbrwps:2264
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    References listed on IDEAS

    as
    1. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 465-490.
    2. Alesina, Alberto & Perotti, Roberto, 1994. "The Political Economy of Growth: A Critical Survey of the Recent Literature," The World Bank Economic Review, World Bank, vol. 8(3), pages 351-371, September.
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    Cited by:

    1. Christophe Ehrhart, 2009. "The effects of inequality on growth: a survey of the theoretical and empirical literature," Working Papers 107, ECINEQ, Society for the Study of Economic Inequality.
    2. Wonik Kim, 2007. "Social Risk and Social Insurance," Rationality and Society, , vol. 19(2), pages 229-254, May.
    3. Karen Davtyan, 2016. "Interrelation among Economic Growth, Income Inequality, and Fiscal Performance: Evidence from Anglo-Saxon Countries," Hacienda Pública Española / Review of Public Economics, IEF, vol. 217(2), pages 37-66, June.
    4. Mark Gradstein & Branko Milanovic, 2004. "Does Libertè = Egalité? A Survey of the Empirical Links between Democracy and Inequality with Some Evidence on the Transition Economies," Journal of Economic Surveys, Wiley Blackwell, vol. 18(4), pages 515-537, September.
    5. Mark Gradstein & Branko Milanovic, 2000. "Does Liberté = Egalité? A Survey of the Empirical Evidence on the Links between Political Democracy and Income Inequality," CESifo Working Paper Series 261, CESifo.
    6. Enrico Longoni & Filippo Gregorini, 2009. "Inequality, Political Systems and Public Spending," Working Papers 159, University of Milano-Bicocca, Department of Economics, revised Apr 2009.
    7. Verónica Amarante & Gioia de Melo, 2004. "Crecimiento económico y desigualdad: una revisión bibliográfica," Documentos de Trabajo (working papers) 04-02, Instituto de Economía - IECON.
    8. International Monetary Fund, 2003. "Income Inequality and Redistributive Government Spending," IMF Working Papers 2003/014, International Monetary Fund.
    9. Louis Chauvel & Eyal Bar-Haim, 2016. "Varieties of Capitalism (VoC) and Varieties of Distributions (VoD): How Welfare Regimes Affect the Pre- and Post-Transfer Shapes of Inequalities?," LIS Working papers 677, LIS Cross-National Data Center in Luxembourg.
    10. Nikoloski, Zlatko, 2015. "Democracy and income inequality: revisiting the long and short-term relationship," LSE Research Online Documents on Economics 60562, London School of Economics and Political Science, LSE Library.
    11. Lee, Woojin, 2003. "Is democracy more expropriative than dictatorship? Tocquevillian wisdom revisited," Journal of Development Economics, Elsevier, vol. 71(1), pages 155-198, June.
    12. Lambert, Peter J. & Millimet, Daniel L. & Slottje, Daniel, 2003. "Inequality aversion and the natural rate of subjective inequality," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1061-1090, May.
    13. Giorgio Calcagnini & Edgar J. Sanchez Carrera & Rosalba Rombaldoni, 2019. "EClustering Democracy and Inequality," Working Papers 1906, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2019.
    14. Ruslan Yemtsov, 2003. "Quo Vadis? Inequality and Poverty Dynamics across Russian Regions," WIDER Working Paper Series DP2003-67, World Institute for Development Economic Research (UNU-WIDER).
    15. Berthold, Norbert & Thode, Eric, 2000. "Umverteilung in der Mittelschicht: notwendiges Übel im Kampf gegen Armut?," Discussion Paper Series 34, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
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    17. Meng Cai & Ximing Yue, 2017. "The Redistributive Role of Government Social Security Transfers on Inequality in China," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 201721, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    18. Francesco De Sinopoli & Giovanna Iannantuoni, 2009. "On the expect of ideology in proportional representation systems," Working Papers 160, University of Milano-Bicocca, Department of Economics, revised Apr 2009.

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