The impact of redistributive policies on inequality in OECD countries

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URL:	https://ub-madoc.bib.uni-mannheim.de/35932
URN:	urn:nbn:de:bsz:180-madoc-359323
Document Type:	Working paper
Year of publication:	2014
The title of a journal, publication series:	ZEW Discussion Papers
Volume:	14-012
Place of publication:	Mannheim
Publication language:	English
Institution:	Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series:	Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject:	330 Economics
Classification:	JEL: D31 , D60 , H20,
Keywords (English):	Inequality , redistribution , social expenditure , progressive taxation
Abstract:	Due to behavioral effects triggered by redistributional interventions, it is still an open question whether government policies are able to effectively reduce income inequality. We contribute to this research question by using different country-level data sources to study inequality trends in OECD countries since 1980. We first investigate the development of inequality over time before analyzing the question of whether governments can effectively reduce inequality. Different identifcation strategies, using fixed effects and instrumental variables models, provide some evidence that governments are capable of reducing income inequality despite countervailing behavioral responses. The effect is stronger for social expenditure policies than for progressive taxation.