Public Redistribution Research Articles

Where Income Becomes Wealth: How Redistribution Moderates the Association between Income and Wealth

The authors study the role of redistributive policy in comparative research on the determinants of wealth. The authors argue that public redistribution affects the level of net wealth by moderating the household-level association of income and wealth. Drawing on microdata for 14 countries from the Luxembourg Wealth Study, and spending and revenue data from the Organisation for Economic Co-operation and Development, the authors use ordinary least squares models with country fixed effects. The authors find a positive moderation effect of social spending and a negative moderation effect of income taxation. Higher and lower labor incomes translate into higher and lower levels of wealth where income taxation is lower or social spending is higher. The authors complement these findings with panel information from the United States, providing further evidence supporting the cross-national results. In summary, public redistribution partially accounts for differences in the association of income and wealth across countries. The authors urge future research on the correlation of income and wealth to take public redistribution into account.

Public redistribution in Europe: Between generations or income groups?

Governments face a potential trade-off between provision for the population in retirement and the support of working-age households with low income. Using EUROMOD-based microdata from 28 countries, we quantify public redistribution to pensioner- and working-age households, distinguishing also by income quartiles. In general, Northern European countries are characterized by a low net redistribution between households, limited public pensions, but a strong support of low-income households. By contrast, most Southern European countries are characterized by a high net redistribution to pensioners, offering generous benefits to some, but little support for working age households with low income. Our results show that a strong public net redistribution between households is associated with generous public benefits for a portion of the retirees, but negatively related to support for the population with low income.

Evaluating the response effort and data quality of established political solidarity measures: a pre-registered experimental test in an online survey of the German adult resident population in 2021.

This experimental study aims to check and improve the quality of 16 established survey measures of political solidarities and related concepts, such as redistribution and social trust. Political solidarities are defined as one's willingness to share the costs that result from public redistribution that favours people other than oneself and thus constitute a subset of welfare state attitudes. The pre-registered study plan included suggestions for the development of improved rating scales, which we defined as five-point, end verbalized rating scales without non-substantive answer options. The overall results from an experimental online survey in Germany indicate differences in response effort in terms of response times but almost no differences in data quality in terms of criterion validity. Thus, the 16 survey measures show solid instrument validity as well as minor improvements in respondents' response times. Indeed, the measures are (at least) in the online survey world of Germany of high-quality and warrant inclusion in future surveys with small efficiency gains still attainable.

Public Redistribution in Europe: Between Generations or Income Groups?

Public Redistribution in Europe: Between Generations or Income Groups?

Public Redistribution and Intergenerational Income Dependency

Public Redistribution and Intergenerational Income Dependency

Public Redistribution in Europe: Between Generations or Income Groups?

Public Redistribution in Europe: Between Generations or Income Groups?

Cervical cancer screening programs and their context-dependent effect on inequalities in screening uptake: a dynamic interplay between public health policy and welfare state redistribution

BackgroundWhile organized and opportunistic cervical cancer screening (CCS) programs implemented across the European Union have increased participation rates, barriers to socioeconomically deprived women remain substantial, implying high levels of inequality in CCS uptake.AimThis study assesses how the screening strategy (as a score based on the availability of organized population-based CCS programs), accessibility of the healthcare system (as an index of out-of-pocket expenditure as a proportion of total healthcare costs, public health expenditure as a percentage of total GDP, and general practitioner (GP) density per 10′000 inhabitants) and social protection (as a decommodification index), impact education- and income-based inequalities in CCS uptake.MethodsA two-level design with 25–64-year-old women (N = 96′883), eligible for Pap smear screening, nested in 28 European countries, was used to analyze data from the European Health Interview Survey’s second wave, using multilevel logistic regression modelling.ResultsClear educational and income gradients in CCS uptake were found, which were smaller in countries with organized CCS programs, higher accessibility of the healthcare system and a higher level of decommodification. Furthermore, three-way interaction terms revealed that these gradients were smaller when organized CCS programs were implemented in countries with better accessibility of the healthcare system or a high level of decommodification.ConclusionThis study indicates that the combination of organized screening and high accessibility of the healthcare system or social protection is essential for having lower levels of inequality in CCS uptake. In such countries, the structural threshold for poorer and lower educated women to engage in CCS is lower. This may be explained by them having a better interaction with their GP, who may convince them of the screening test, lower out-of-pocket payments, and financial support to buffer against a disadvantageous position on the labor market.

THE RELATIONSHIP OF SOCIAL TRANSFER EXPENDITURES-INCOME INEQUALITY: A COMPARATIVE PANEL CAUSALITY ANALYSIS

Pek çok gelişmiş ve gelişmekte olan ülke açısından gelir eşitsizliği seviyelerinde meydana gelen 
 artışlar; kamunun vergiler, transfer ödemeleri ile kamusal mal ve hizmet sunumu aracılığıyla ekonomiye 
 müdahalesinin yetersiz ve etkinsiz gerçekleşmesi nedeniyle kaçınılmaz olarak ortaya çıkmaktadır. 
 Özellikle, kamu harcamaları çerçevesinden bakıldığında düşük gelir gruplarına yapılan transfer 
 ödemelerinin gelir eşitsizliğini azaltmakta kilit bir rol oynadığı öne sürülebilmektedir. Zira, birçok 
 çalışmada toplam gelir eşitsizliğinin analiz edilmesinde en yaygın kullanılan ölçüt olan Gini katsayısının 
 kamunun yeniden dağıtım politikaları içerisinde en fazla transfer harcamalarına duyarlı olduğu sonucuna 
 ulaşılmıştır. Bu çalışmanın amacı, sosyal transfer harcamaları ve gelir eşitsizliği ilişkisinin ülkelerin gelir 
 düzeyindeki farklılıkların analize dâhil edilerek ortaya koyulmasıdır. Bu çerçevede, analize konu edilen 60 
 adet ülke Dünya Bankası’nın sınıflandırmasına göre ayrıştırılmış ve 1996-2018 yıllarını kapsayan 
 dönemde sosyal transfer harcamaları-gelir eşitsizliği ilişkisinin tespiti için Dumitrescu-Hurlin panel 
 nedensellik analizi kullanılmıştır. Elde edilen bulgular, hem yüksek gelir grubuna dâhil ülkelerde hem de 
 yüksek-orta ve düşük-orta gelir grubuna dâhil ülkelerde sosyal transfer harcamaları ve gelir eşitsizliği 
 arasında çift yönlü nedensellik ilişkisi bulunduğuna işaret etmektedir. Ancak, yüksek gelir grubuna dâhil 
 ülkelerde bu ilişki göreli olarak daha güçlü ortaya çıkmaktadır.

Trust in European Institutions in Explaining the Entrepreneurship in European Union Countries

Entrepreneurship is believed to be shaped by institutions; however, the paper assumes that trust in institutions is a fundamental prerequisite for the impact of institutions on entrepreneurship. The aims of the paper are to determine (i) whether trust in European institutions affects the level of entrepreneurship in European Union countries, and (ii) whether there are any differences in this impact regarding the types of institutions and (iii) a country’s government budget size. Based on yearly panel data for 27 European Union countries in the years 2004–2019 and estimations of panel regression models, the results show that confidence in institutions is a significant factor in explaining entrepreneurship. However, institutional trust has no homogeneous effect on entrepreneurship, as the impact depends on the kind of institutions related to their functions and values as well as on the country’s characteristics in relation to the size of the government’s budget. Practical implications suggest the possibilities of supporting entrepreneurship—especially in countries with a relatively lower public redistribution—by raising the level of confidence in the European Central Bank. The originality of the paper is related to distinguishing institutional trust based on the type of institutions and the country’s characteristics of governmental budget size.

An Analysis of Japanese Economy and Labor Market From Disparities by Gender and Employment Types of Lifetime and Annual Income, Public Pension Benefit and Redistribution

An Analysis of Japanese Economy and Labor Market From Disparities by Gender and Employment Types of Lifetime and Annual Income, Public Pension Benefit and Redistribution

The Research Agenda of POLITSOLID: The Ties that Bind - Experimental Analyses of Political Solidarities in Modern European Democracies

POLITSOLID (ERC funded Consolidator Grant 2021-5) investigates the micro-foundations of political solidarities in fast-changing European polities. It analyses why some ordinary citizens show a high overall willingness to shoulder costs of public redistribution to other people in a polity, while others do not; and why ordinary citizens have multiple levels of willingness to shoulder costs depending on who receives the benefit. Relevance: Having high levels of political solidarities is important for modern democracies to deal with exogenous shocks and long-term structural changes in their societies, which create pressures on the political system. Recent exogenous shocks in Europe that brought the necessity of political solidarities to light were the financial crisis (2007/8) with its extensive transnational bail-out policies across the European Union and the large refugee intake (2015/16). Relevant long-term structural changes are population ageing, rising income inequality and mass immigration. This project answers the overarching research question: What drives political solidarities in modern European democracies? Objectives • To create a novel theoretical and empirical framework that allows simultaneous modelling of multiple political solidarities and that includes the individual as well as the macro levels to enable better predictions about how people behave. • To test causal mechanisms with a range of mostly experimental methods to get a better understanding of causality where observational studies have so far dominated. • To isolate effective levers that political actors can pull to create political solidarities. Data: POLITSOLID collects and analyses new data from (1) lab experiments & online surveys, (2) a simulated artificial state ‘Novaland’ in which volunteers from Austria, Germany & Switzerland act as citizens in an online environment, with experimental treatments applied, (3) an international panel survey in six countries and (4) field experiments in collaboration with real political actors.

ПЕРЕРОЗПОДІЛ І СПРАВЕДЛИВІСТЬ: ФІЛОСОФСЬКІ ОСНОВИ ТА ПОГЛЯДИ ТЕОРІЇ СУСПІЛЬНИХ ФІНАНСІВ

The article considers the conceptual basis of redistribution as an economic phenomenon that occurs at different levels of the economic system (household, market, state). The types of redistributive effects are determined: market redistribution (provided by the price mechanism) and public redistribution (formed as a result of the functioning of the public sphere). Key attention is paid to social redistribution, which proposes to distinguish between fiscal (carried out through the system of public finance through taxation, transfers) and non-fiscal (arising from government actions that affect the functioning of the market). The links between public redistribution and views on justice have been explored. Philosophical and moral-ethical aspects of public redistribution are considered. Attention is paid to the criteria of redistributive justice. Some provisions of the theory of public finance on the interpretation of the phenomenon of social redistribution are revealed. It is noted that consideration of the conceptual foundations of public redistribution requires a philosophical vision of justice, consideration of the procedural aspects of finding a political compromise in a modern democratic society, as well as an assessment of the economic effects associated with redistribution. It is noted that for a clear understanding of the overall effect of redistribution processes it is necessary to simultaneously analyze the efficiency of market exchange, the perfection of mechanisms of primary distribution of income by the market and the direction of fiscal redistribution and transfer policy through the public finance system. The lack of unambiguous criteria for ensuring redistributive justice is emphasized. This necessitates the widespread application of the criterion of injustice. The need to realize the importance of recognizing inequality as a methodological principle of economic functioning is pointed out. It is noted that this will contribute to a more rational formulation of normative goals and priorities of the state redistributive policy in applied research of public finance.

Aging, education and intergenerational flows in Uruguay

This article addresses the challenges posed by aging and inequality in a developing country, specifically Uruguay, by considering present and future intergenerational net public flows by age and socioeconomic group. We discuss the potential impact of the aging process on public redistribution by age and socioeconomic group, based on population projections by educational level elaborated from the Wittgenstein Centre for Demography and Global Human Capital (WIC). To address the potential effects of changes in age and educational structures by 2050, we estimate education-specific per capita age-profiles for public inflows and outflows in the baseline year and apply them to 2050 projections. Our results show substantial disparities in the present age profile of net flows from the public sector to population by educational group: the higher the level of education, the earlier net transfers change from positive to negative for individuals. Only the less educated group benefits directly from public redistribution, while the other three educational groups are net payers. Under plausible scenarios of educational expansion, net public flows result in a higher surplus in public accounts. A linear decomposition of the dynamic effects shows that this result is mainly driven by educational improvement, as the associated increase in outflows leads to a surplus in public accounts. In this way, the negative effect of changes in the age structure on net flows is counteracted. Redistributive tensions between educational groups also tend to dilute in the medium term because of educational expansion.

Rethinking the Income Inequality and Financial Development Nexus. A Study of Nine OECD Countries

Sustainable finance seeks to increase the contribution of finance to sustainable and inclusive growth. The global financial crisis of 2008 provoked the return of inequality in advanced countries to levels typical of a century ago. The aim of this paper is to empirically analyze the relationship between finance and income inequality for a group of nine OECD countries over the pre-crisis and post-crisis periods (2000–2015). The model proposed in this study simultaneously considers two explanatory variables for measuring financial depth (credit provision and capital markets) and a new multidimensional variable to measure the financial system’s resilience (a composite indicator), and conducts panel data analysis. The empirical results confirm that in terms of financial depth, the "too much finance hypothesis" holds. We also find that financial system’s resilience helps alleviate existing income inequality and that income inequality appears higher in liberal market economies than in coordinated economies. These results encourage policymakers to look beyond traditional public redistribution interventions and to pay attention to other financial variables related to the financialization process, the behavior of financial intermediaries, and the specific environment in which they operate.

Channeling the final say in politics: a simple mechanism

We examine public project provision and redistribution in a model of legislative bargaining and provide a foundation of how to channel the say. We consider a large and heterogeneous legislature and show that socially optimal outcomes are obtained by a mechanism based on the majority rule that involves two proposal-making rounds, with the minority moving first and the majority moving second.

Ricardian Equivalence Under Asymmetric Information

Several empirical studies have found that extended household units do not appear to be highly altruistically linked, thereby violating the very premise of the Ricardian Equivalence Hypothesis (REH). This finding has a very strong implication for the effectiveness of fiscal policies that change the allocation of resources between generations. We build a two-sided altruistic-linkage model in which private transfers are made in the presence of two types of shocks: an “observable” shock that is public information (for example, a public redistribution like debt or pay-as-you-go social security) and an “unobservable” shock that is private information (for example, individual wage innovations). Parents and children observe each other’s total income but not each other’s effort level. In the second-best solution, unobservable shocks are only partially shared, whereas, for any utility function satisfying a condition derived herein, observable shocks are fully shared. The model, therefore, can generate the low degree of risk sharing found in previous empirical studies, but REH still holds.

But It Only Benefits Them! The Influence of Social Ties on Taxation

Purpose This paper concerns the influence of social ties with ‘others’ – people outside of one’s close-knit social groups - on tax morale and tax revenues. It is hypothesised that such social ties decrease in-group favouritism, changing citizens’ preferences for public goods and redistribution, and, thereby, increase tax morale. This increase in tax morale impacts tax policies and tax compliance, raising tax revenues. Approach I test the first part of this hypothesis – the relationship between social ties and tax morale – by using individual-level data and the first factor of three trust variables as a proxy for social ties with ‘others’. To determine whether social ties influence tax revenues, I rely on a historic, exogenous proxy of social ties with ‘others’ based on a project carried out in developing countries by Adelman and Morris in the 1960s. Findings The evidence does not reject the hypothesis that people with stronger social ties with ‘others’ have greater tax morale and that this translates into higher tax revenues. Originality The literature overwhelmingly views taxation from an atomistic individualist methodology. Viewing taxation from an organic interdependence methodology, this paper provides the first empirical evidence of the influence of social ties on taxation.

Redistributional Policy in Rich Countries: Institutions and Impacts in Nonelderly Households.

We review research on institutions of redistribution operating in high-income countries. Focusing on the nonelderly, we invoke the concept of the household income package, which includes income from labor, from related households, and from the state. Accordingly, we assess three institutional arenas: predistribution (rules and regulations that govern paid work), private redistribution (interhousehold transfers), and conventional public redistribution (operating via cash transfers and direct taxes). In each arena, we assess underlying policy logics, identify current policy controversies, summarize contemporary cross-national policy variation, and synthesize existing findings on policy effects. Our assessment of redistributional effects focuses on three core socioeconomic outcomes: low pay, child poverty, and income inequality. We close by assessing how the three institutional arenas perform collectively and by calling for further work on how these institutions change over time and how they affect subgroups differentially.

Intra-household income inequality and preferences for redistribution

We empirically analyze the relationship between income inequality and individual preferences for public redistribution, focusing on intra-household income inequality between spouses. Using data from the German Socio-Economic Panel, we find that both one’s own earned income and earned intra-household income inequality are significantly negatively related to preferences for public redistribution. However, as the earned income inequality between partners increases, the poorer partner’s preference for public redistribution declines while the richer partner’s preference for public redistribution increases. The poorer partners’ preferences may, in fact, indicate preferences for intra-household redistribution from the richer to the poorer partner. The richer partners’ preferences may be explained by the fact that, when married, they can realize tax savings and, therefore, have to pay relatively less for public redistribution. Moreover, our results confirm previous findings regarding a partner’s future social mobility prospects upon cohabitation ending, because they show that having a strong outside option, i.e., a high wage potential, is significantly negatively related to redistributive preferences, especially among those with an above-average future wage potential.

Growth effects of inequality and redistribution: What are the transmission channels?

Evidence from a large panel of harmonized data highlights a negative effect of income inequality on economic growth. Less equal societies tend to have less educated populations, higher fertility rates, and lower investment shares. These effects are particularly prevalent if credit availability is limited, while public education spending attenuates the negative effects of inequality. Public redistribution, measured as the difference between Ginis of market and net income, hampers growth via lower investment and increased fertility. Yet, combined with its positive effect through lower inequality, the impact of redistribution is insignificant. In developing countries redistribution can even be growth enhancing.