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Distribution of Income and Redistribution

Igor Barenboim (Graduate Student, Harvard University, Department of Economics) & Loukas Karabarbounis (Ph.D. Candidate, Harvard University, Department of Economics) have posted One Dollar, One Vote on SSRN.  Here is the abstract:

We revisit the relationship between inequality and redistribution in a panel of advanced OECD countries. Using panel data methods that hold constant a variety of determinants of the public redistributive policy, we find a non-monotonic relationship between distribution of income and redistribution. Relatively to mean income, a more affluent rich and middle class are associated with lower, and a richer poor class with higher public spending for redistribution. These results are consistent with what we define as a one dollar, one vote politico-economic equilibrium: When the income of a group of citizens rises (relative to mean income), aggregate redistributive policies tilt towards this group's most preferred public policy.


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