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Do policies and institutions matter for pre-tax income inequality? Cross-country evidence

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  • Damián Vergara

    (UC Berkeley)

Abstract

Do policies and institutions matter for pre-tax income inequality? I build an annual panel of 43 countries for the period 1980–2016 to document cross-country facts. I find robust correlations between pre-tax income shares and economic policy—financial development, trade openness, government expenditure, and income taxation—even after controlling for economic development. I further find that proxies of institutional quality—e.g., state development, corruption, or political exclusion—mediate the relationship between top income shares and economic policy, in particular for trade openness and government expenditure. The role of institutions in allowing or limiting rent-seeking can rationalize the results.

Suggested Citation

  • Damián Vergara, 2022. "Do policies and institutions matter for pre-tax income inequality? Cross-country evidence," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(1), pages 30-52, February.
    • Handle: RePEc:kap:itaxpf:v:29:y:2022:i:1:d:10.1007_s10797-021-09661-6
    DOI: 10.1007/s10797-021-09661-6
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    4. Marenzi, A.; & Rizzi, D.; & Zanette, M.; & Zantomio, F.;, 2022. "Regional Institutional Quality and Territorial Equity in LTC Provision," Health, Econometrics and Data Group (HEDG) Working Papers 22/27, HEDG, c/o Department of Economics, University of York.
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    More about this item

    Keywords

    Inequality; Policies; Institutions;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F6 - International Economics - - Economic Impacts of Globalization
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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