The impact of redistributive policies on inequality in OECD countries

By Philipp Doerrenberg, Andreas Peichl. Social Science Research Network, 2012

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Due to behavioural effects triggered by redistributional interventions, it is still an open question whether government policies are able to effectively reduce income inequality. We contribute to this research question by using different country-level data sources to study inequality trends in OECD countries since 1980. We first investigate the development of inequality over time before analysing the question of whether governments can effectively reduce inequality. Different identification strategies, using fixed effects and instrumental variables models, provide some evidence that governments are capable of reducing income inequality despite countervailing behavioural responses. The effect is stronger for social expenditure policies than for progressive taxation.

Subfields: Economics and Econometrics, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/7def9aa9803ef9096b55b37f1d3bb4523d739dbb