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One Dollar, One Vote

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  • Loukas Karabarbounis

Abstract

This paper revisits 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 redistributive spending, I find a non-monotonic relationship between pre-tax-and transfer distribution of income and redistribution. Relative to mean income, a more affluent rich and middle class are associated with less redistribution and a richer poor class is associated with more redistribution. These results are consistent with a one dollar, one vote politico-economic equilibrium: When the income of a group of citizens increases, aggregate redistributive policies tilt towards this group’s most preferred policies.
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Suggested Citation

  • Loukas Karabarbounis, 2011. "One Dollar, One Vote," Economic Journal, Royal Economic Society, vol. 121(553), pages 621-651, June.
    • Handle: RePEc:ecj:econjl:v:121:y:2011:i:553:p:621-651
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    More about this item

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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