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Inherent Inequality and the Extent of Redistribution in OECD Countries

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  • Matti Tuomala
  • Hannu Tanninen

Abstract

TThe purpose of this paper is to examine the relationship between the inherent inequality and the extent of redistribution by utilising the Luxembourg Income Study (LIS) database. This database provides both market and disposable income distributions for a number of OECD countries. Our finding that redistribution in OECD countries is positively associated with inherent inequality is not the new one. The point we have made in this paper is that this finding can be explained through the Mirrlees optimal income tax model. If the inherent inequality increases (decreases) for any given incentive effects and the degree of espoused egalitarianism so will the society's redistributive effort.
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Suggested Citation

  • Matti Tuomala & Hannu Tanninen, 2005. "Inherent Inequality and the Extent of Redistribution in OECD Countries," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 3(01), pages 48-53, April.
    • Handle: RePEc:ces:ifodic:v:3:y:2005:i:01:p:48-53
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    References listed on IDEAS

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    Cited by:

    1. Alessandro Bucciol & Laura Cavalli & Paolo Pertile & Veronica Polin & Alessandro Sommacal, 2016. "Redistribution at the local level: the case of public childcare in Italy," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 63(4), pages 359-378, December.
    2. Milanovic, Branko, 2010. "Four critiques of the redistribution hypothesis: An assessment," European Journal of Political Economy, Elsevier, vol. 26(1), pages 147-154, March.
    3. Fabio Padovano & Francesco Scervini & Gilberto Turati, 2021. "Comparing governments’ efficiency at supplying income redistribution," Constitutional Political Economy, Springer, vol. 32(1), pages 68-97, March.
    4. Fabio Padovano & Gilberto Turati, 2012. "Redistribution through a "Leaky Bucket". What explains the Leakages?," Economics Working Paper from Condorcet Center for political Economy at CREM-CNRS 2012-03-ccr, Condorcet Center for political Economy.
    5. Daniela Sonedda & Gilberto Turati, 2005. "Winners and Losers in the Italian Welfare State: A Microsimulation Analysis of Income Redistribution Considering In-Kind Transfers," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 64(4), pages 423-464, December.
    6. Fabio Padovano & Francesco Scervini & Gilberto Turati, 2016. "How do Governments Fare about Redistribution? New Evidence on the Political Economy of Redistribution," CESifo Working Paper Series 6137, CESifo.
    7. Hannu Tanninen & Matti Tuomala & Elina Tuominen, 2019. "Income Inequality, Redistributive Preferences and the Extent of Redistribution: An Empirical Application of Optimal Tax Approach," LIS Working papers 743, LIS Cross-National Data Center in Luxembourg.

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    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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