Top income shares in OECD countries: The role of government ideology and globalisation

This paper investigates how government ideology and globalisation are associated with top income shares in 17 OECD countries over the period 1970 to 2014. We use top income shares of the World Wealth and Income Database (WID). Globalisation is measured by the KOF index of globalisation. Static and dynamic panel model results show that the top income shares increased more under right wing governments than under left wing governments. The ideology-induced effect was stronger when globalisation proceeded more rapidly. Globalisation was positively correlated with income shares of the upper-middle class (P99-P90), but negatively with income shares of the rich (top 1%) in the overall sample. We show that the relationship differs between Anglo-Saxon countries and other OECD countries. Globalisation was more pro-rich in Anglo-Saxon countries than in other OECD countries. Government ideology does not turn out to have a statistically significant effect on top income shares in Anglo-Saxon countries after the 1980s, whereas ideology-induced differences in the distributional outcomes continued in other OECD countries.