Inequality, Redistribution, and the Individualism-Collectivism Dimension of Culture

Abstract

This paper examines the relationship between culture, inequality, and redistribution, focusing on the individualism-collectivism dimension of culture. Perhaps surprisingly, countries with more individualistic cultures have significantly lower levels of after-tax income inequality and greater income redistribution. This finding also holds when using instruments for individualism suggested by the literature on cross-cultural psychology, including historical pathogen prevalence and linguistic and genetic characteristics, to address reverse causality, and is driven by higher-income countries. In higher income countries, individualism is positively correlated with generalized trust and tolerance of outsiders and negatively correlated with belief in traditional gender roles. In contrast, in lower income countries, individualism is associated with a stronger emphasis on self-reliance and the benefits of competition.