By the same authors

Inequality and the Size of Government

Research output: Working paperDiscussion paper

Standard

Inequality and the Size of Government. / Luo, Weijie; Pickering, Andrew Christopher; Santos Monteiro, Paulo.

2017. p. 1-37.

Research output: Working paperDiscussion paper

Harvard

Luo, W, Pickering, AC & Santos Monteiro, P 2017 'Inequality and the Size of Government' pp. 1-37.

APA

Luo, W., Pickering, A. C., & Santos Monteiro, P. (2017). Inequality and the Size of Government. (pp. 1-37).

Vancouver

Luo W, Pickering AC, Santos Monteiro P. Inequality and the Size of Government. 2017 Feb 17, p. 1-37.

Author

Luo, Weijie ; Pickering, Andrew Christopher ; Santos Monteiro, Paulo. / Inequality and the Size of Government. 2017. pp. 1-37

Bibtex - Download

@techreport{6edf3a7280f545abb1fd37535722ef79,
title = "Inequality and the Size of Government",
abstract = "The median voter theory of government size predicts that greater inequality leads to greater demand for redistribution and larger government (Meltzer and Richard, 1981). However, this prediction is often rejected empirically. This paper distinguishes between income inequality induced by differences in labor productivity and income inequality induced by differences in capital income. Whilst the standard argument applies to productivity-induced income inequality, greater capital income inequality leads to smaller government if, as often observed, capital income is difficult to tax. Using OECD data, government size and capital income inequality (proxied by the top 1{\%} income share) are found to be negatively related in both fixed effects and instrumental variable regressions. Moreover, controlling for capital income inequality yields a positive and significant relationship between government size and labor income inequality, as originally conjectured.",
keywords = "capital income, inequality, size of government",
author = "Weijie Luo and Pickering, {Andrew Christopher} and {Santos Monteiro}, Paulo",
year = "2017",
month = "2",
day = "17",
language = "English",
pages = "1--37",
type = "WorkingPaper",

}

RIS (suitable for import to EndNote) - Download

TY - UNPB

T1 - Inequality and the Size of Government

AU - Luo, Weijie

AU - Pickering, Andrew Christopher

AU - Santos Monteiro, Paulo

PY - 2017/2/17

Y1 - 2017/2/17

N2 - The median voter theory of government size predicts that greater inequality leads to greater demand for redistribution and larger government (Meltzer and Richard, 1981). However, this prediction is often rejected empirically. This paper distinguishes between income inequality induced by differences in labor productivity and income inequality induced by differences in capital income. Whilst the standard argument applies to productivity-induced income inequality, greater capital income inequality leads to smaller government if, as often observed, capital income is difficult to tax. Using OECD data, government size and capital income inequality (proxied by the top 1% income share) are found to be negatively related in both fixed effects and instrumental variable regressions. Moreover, controlling for capital income inequality yields a positive and significant relationship between government size and labor income inequality, as originally conjectured.

AB - The median voter theory of government size predicts that greater inequality leads to greater demand for redistribution and larger government (Meltzer and Richard, 1981). However, this prediction is often rejected empirically. This paper distinguishes between income inequality induced by differences in labor productivity and income inequality induced by differences in capital income. Whilst the standard argument applies to productivity-induced income inequality, greater capital income inequality leads to smaller government if, as often observed, capital income is difficult to tax. Using OECD data, government size and capital income inequality (proxied by the top 1% income share) are found to be negatively related in both fixed effects and instrumental variable regressions. Moreover, controlling for capital income inequality yields a positive and significant relationship between government size and labor income inequality, as originally conjectured.

KW - capital income

KW - inequality

KW - size of government

M3 - Discussion paper

SP - 1

EP - 37

BT - Inequality and the Size of Government

ER -