The redistributive effect of social transfer programmes and taxes: A decomposition across countries

The aim of this article is to offer detailed information of the redistributive impact of social transfer programmes and taxes in 28 Member countries of the Organisation for Economic Co‐operation and Development, employing data that have been computed from the Luxembourg Income Study's micro‐level database. We find that welfare states on average reduce inequality by 35 per cent. Social benefits have a much stronger redistributive impact than taxes. As far as social programmes are concerned, public pensions account for the largest reduction in income inequality, although the pattern is diverse across countries. To a lesser extent, social assistance, disability and family benefits also contribute to smaller income disparities.     

The Racial Structure of Economic Inequality in the United States: Understanding Change and Continuity in an Era of “Great Divergence”*

The “great divergence” of America's rich from its middle class and poor has led some observers to see a country increasingly stratified by income and wealth, more so than by race. In this article, the first in a two‐part series, we argue that this conclusion overlooks the persistent importance of the racial “structure” of inequality. A decomposition of income inequality between 1980 and 2010 using the Theil Index shows that inequality between racial groups accounts for a rising share of total income inequality over this period nationally and in most states. We also demonstrate that within‐state trends in the between‐race component of inequality are not fully accounted for by trends in income inequality and racial diversity per se. These findings lay the groundwork for a forthcoming companion piece in Social Science Quarterly that shows that between‐race inequality is strongly linked to welfare policy outcomes in the United States.     

State Income Inequality and Presidential Election Turnout and Outcomes*

Objective. This study examines the links among income inequality, voter turnout, and electoral choice at the state level in recent presidential elections. Methods. We introduce two new state‐level ecological data sets, estimated annual Gini coefficients of income inequality from 1969 to 2004 and a measure of income segregation across Census tracts within states in 1999. We test for associations among inequality, turnout, and party preference with cross‐sectional, fixed‐effects, and multilevel analyses. Results. The cross‐sectional effect of inequality on voter turnout and electoral choice is ambiguous. However, a fixed‐effects analysis links higher income inequality to lower voter turnout and also to a stronger Democratic vote. Multilevel results indicate that higher levels of economic segregation likewise are associated with depressed turnout, after controlling for individual voter characteristics and for state‐level income.     

Stochastic Choice and Consistency in Decision Making Under Risk: An Experimental Study

This paper reports the results of an experiment designed to uncover the stochastic structure of individual preferences over lotteries. Unlike previous experiments, which have presented subjects with pair-wise choices between lotteries, our design allowed subjects to choose between two lotteries or (virtually) any convex combination of the two lotteries. We interpret the mixtures of lotteries chosen by subjects as a measure of the stochastic structure of choice. We test between two alternative interpretations of stochastic choice: the random utility interpretation and the deterministic preferences interpretation. The main findings of the experiment are that the typical subject prefers mixtures of lotteries rather than the extremes of a linear lottery choice set. The distribution of choices does not change between a first and second asking of the same question. We argue that this provides support for the deterministic preferences interpretation over the random utility interpretation of stochastic choice. As a subsidiary result, we find a small proportion of subjects make choices that violate transitivity, but the level of intransitive choice falls significantly over time.     

Public Policy,Economic Inequality,and Poverty: The United States in Comparative Perspective*

Objective. This article compares recent levels and trends in economic inequality in industrialized nations, largely those belonging to the Organization for Economic Cooperation and Development. We also examine the effects of government policies and social spending efforts on inequality. Method. We use data from the Luxembourg Income Study and the U.S. Congressional Budget Office to measure disposable money income on an annual basis for 30 nations around the end of the 20th century. We also convert the incomes of a set of rich nations into real 2000 U.S. dollars, using a standard measure of purchasing power parity to examine absolute differences in income inequality. Results. The United States has the highest overall level of inequality of any rich OECD nation at the beginning of the 21st century. Moreover, increases in the dispersion of total household income in the United States have been as large as, or larger than, those experienced elsewhere between 1979 and 2002. Government policies and social spending have lesser effects in the United States than in any other rich nation, and both low spending and low wages have a great impact on the final income distribution, especially among the nonelderly. Conclusion. We speculate on the role policy plays in the final determination of income inequality. We argue that these differences cannot be explained by demography (single parents, immigrants, elders) but are more likely to be attributed to American institutions and lack of spending effort on behalf of low‐income working families.     

Racial Representation and U.S. Senate Apportionment*

Objectives. This research note explores whether the system of assigning each state equal representation in the U.S. Senate adversely affects racial minorities, groups that often have common political interests. We also project changes in minority representation over the next 20 years using Census data. Methods. We develop a new method of assessing racial bias due to apportionment, which calculates the number of seats lost by groups due to equal representation, a more substantively meaningful statistic than correlational measures. Results. We find that both African Americans and Hispanics are substantially underrepresented due to their greater presence in high‐population states as compared to in low‐population states. Whereas bias against African Americans appears to be falling, the demographic patterns of Hispanics will make them even more underrepresented in coming years. Conclusions. These findings are especially consequential considering that malapportionment has important public policy implications, including greater per‐capita distributive benefits for smaller states. Further, given that the Senate serves as a major veto point in U.S. politics, racial bias due to equal apportionment may have a significant impact on current and future political debates relevant to minority groups.     

Linking taxation and social protection: Evidence on redistribution and poverty reduction in Ethiopia

Although redistribution results from the simultaneous effects of taxes and transfers, analyses of their distributional effects in low‐income countries have largely been undertaken from singular perspectives. This article jointly assesses the distributional effect of taxes and transfers (through social protection) using Ethiopia as a case study. We find that Ethiopia's flagship social protection programme is more effective than income taxation in achieving poverty reduction, while neither policy achieves a sizeable reduction in overall inequality. We also find that Ethiopia does not currently have the capacity to close the poverty gap or to fully fund its main safety net programme using domestic income sources alone.     

Does financial development affect income inequality in the U.S. States?

This paper examines the role of financial development on U.S. state-level income inequality in the 50 states from 1976 to 2011, using fixed-effect estimation. We find robust results whereby financial development linearly increases income inequality for the 50 states. When we divide 50 states into two separate groups of above-average and below-average inequality states than the cross-state average inequality, the effect of financial development on income inequality appears non-linear. When financial development improves, the effect increases at an increasing rate for above-average income-inequality states, whereas an inverted U-shaped relationship exists for below-average income-inequality states. To our knowledge, this paper is the first to examine the role of financial development on U.S. state-level inequality.     

Has the redistributive effect of social transfers and taxes changed over time across countries?

In most Member countries of the Organisation for Economic Co‐operation Development (OECD), the income gap between rich and poor has widened over the past decades. This article analyses whether and to what extent income taxes and social transfers have contributed to this trend. Has the redistributive impact of different social programmes changed over time? We use microdata from the LIS Cross National Data Center in Luxembourg for the period 1982–2014 and study both the total population and the working‐age population. In contrast to the results of some other studies, especially by the OECD, we do not find that redistribution has declined. Tax‐benefit systems around 2013 are more effective at reducing income inequality compared to the mid‐1980s and the mid‐1990s, especially among the total population. Changes in social programmes are not a driver of greater income inequality across the countries included in this study.     

Welfare State Changes and Outcomes – The Cases of Portugal and Denmark from a Comparative Perspective

It is well known that welfare states ensure a certain level of social protection affecting levels of well‐being and the extent of inequalities in society. Changes within crucial domains of social policy, such as education, health, or social protection, have, therefore, a major effect upon individuals' opportunities. In this article I compare the effects of these changes in two countries from the mid‐1980s to the financial crisis of 2008. Portugal that was a latecomer in welfare state development and Denmark was at the forefront of de‐commodification and universalization of social rights. The conclusion of this article is that income inequality has been steadily increasing in Danish society; while in Portugal, despite improvements in many social domains (healthcare, poverty alleviation, unemployment protection), problems of inequality remain deeply embedded in the country's social and institutional structures.     

On Inter‐ and Intra‐Individual Redistribution of the Welfare State*

Objective. The redistributive effect of the welfare state is traditionally measured by comparing the gross and net distribution of annual income among adults. This standard approach does not account for the fact that a large share of the taxes paid by adults are paid back to the very same individuals later in life. The objective of this article is to examine the factors that determine the difference between redistribution according to the standard approach and redistribution of lifetime incomes. I also discuss under what circumstances intra‐individual redistribution is beneficial for low‐income earners. Methods. A formal model of a simple welfare state in a society with low‐ and high‐income earners is used to describe inequality of gross and net income among adults and for complete lifetime incomes. The model is calibrated with data describing the Swedish welfare state. Results. Theoretically, the redistribution of lifetime income can be bigger or smaller than the redistribution indicated by the standard approach. Swedish data suggest that most welfare states are more redistributive when a lifetime perspective is used compared to the standard approach. Conclusions. Most of the redistribution carried out by modern welfare states is so‐called intra‐individual redistribution. Compared to the situation that would arise without the welfare state, intra‐individual redistribution is likely to be favorable for low‐income earners because it compensates for inequalities in the distribution of assets and access to capital markets.     

Immigration and wage inequality in the 1990s: Panel evidence from the current population survey

In spite of record economic growth in the 1990s, income inequality continued to escalate in the United States. One popular explanation is that the proportion of unskilled immigrant inflows has increased due to policy reforms over the last four decades. This study evaluates the impact of immigrant skills on inequality using a panel data set of states derived from the March Current Population Survey (CPS). The data set provides unique insights into local impacts of immigration due to its ability to discern shorter-term annual adjustments versus the traditional longer-term focus of the Decennial Census. Using a basic theoretical model to develop testable hypotheses, the dynamic analyses reveal that increased relative inflows of unskilled immigrants indeed increase wage inequality. The impact on native wage inequality is especially pronounced, with an effect nearly twice as large as that on overall wage inequality.     

A variational model of preference under uncertainty

A familiar example devised by Daniel Ellsberg to highlight the effects of event ambiguity on preferences is transformed to separate aleatory uncertainty (chance) from epistemic uncertainty. The transformation leads to a lottery acts model whose states involve epistemic uncertainty; aleatory uncertainty enters into the statedependent lotteries. The model proposes von Neumann-Morgenstern utility for lotteries, additive subjective probability for states, and the use of across-states standard deviation weighted by a coefficient of aversion to variability to account for departures from Anscombe-Aumann subjective expected utility. Properties of the model are investigated and a partial axiomatization is provided.     

Public health care in the balance: exploring popular support for health care systems in the European Union

Which factors explain intra‐ and inter‐country variations in levels of public support for national health care systems within the European Union, and why? We propose that public opinion towards public health care is dependent on (1) the type of welfare state regime to which the various European welfare states belong, (2) typical features of the national care system and (3) individual social and demographic characteristics, which are related to self‐interest or morality oriented motives. To assess the explanatory power of these factors, data from the Eurobarometer survey series are analysed. Support for public health care appears to be particularly positively related to social‐democratic attributes of welfare states, whereas support drops with increasing degrees of liberalism and conservatism. Further, support for public health care proves to be associated with wider coverage and public funding of national care services. We also find higher levels of support in countries with scarce social services for children and the elderly, and larger proportions of female (part‐time) employment. Lastly, with respect to individual characteristics, we find remarkably little evidence for self‐interest oriented motives affecting the preference for solidary health care arrangements.     

Choice procedure consistent with similarity relations

We deal with the approach, initiated by Rubinstein, which assumes that people, when evaluating pairs of lotteries, use similarity relations. We interpret these relations as a way of modelling the imperfect powers of discrimination of the human mind and study the relationship between preferences and similarities. The class of both preferences and similarities that we deal with is larger than that considered by Rubinstein. The extension is made because we do not want to restrict ourselves to lottery spaces. Thus, under the above interpretation of a similarity, we find that some of the axioms imposed by Rubinstein are not justified if we want to consider other fields of choice theory. We show that any preference consistent with a pair of similarities is monotone on a subset of the choice space. We establish the implication upon the similarities of the requirement of making indifferent alternatives with a component which is zero. Furthermore, we show that Rubinstein's general results can also be obtained in this larger class of both preferences and similarity relations.The nontransitiveness of indifference must be recognized and explained on any theory of choice and the only explanation that seems to work is based on the imperfect powers of discrimination of the human mind whereby inequality becomes recognizable only when of sufficient magnitude.     

Income inequality and health outcomes in the United States: An empirical analysis

A growing body of research suggests a relationship between health and income inequality. This study specifically analyzes the correlation between income inequality, measured by state-level Gini coefficients from the American Community Survey (ACS), and individual behavioral, physical, and mental health outcomes from the Behavioral Risk Factor Surveillance System (BRFSS) for 2006 through 2014. After controlling for demographic and socioeconomic characteristics, health insurance status, year trends, and state fixed effects, income inequality was found to have significant relationships with behavioral, physical, and mental health outcomes, including heavy drinking, obesity, exercise, diabetes, heart attack, heart disease, physical and mental health problems, and depression, and often the impact on low-income individuals is slightly smaller than on the high-income group. The research suggests that economic policies to address the rising income inequality in the United States might serve to also address some of our nation’s most troubling health statistics.     

State Gender Inequality,Socioeconomic Status and Intimate Partner Violence (IPV) in India: A Multilevel Analysis

While a growing body of literature has investigated the health impact of intimate partner violence (IPV), less has been written on the social determinants of IPV. The authors use multilevel modeling methods to analyze data from a sample of 83,627 women in India to examine the socioeconomic and demographic patterning of the state‐ and neighborhood‐level variation in, and the state‐ and/or neighborhood‐level characteristics related to, IPV. This study finds social gradients in IPV in which women who are uneducated, from marginalized castes, and living in poor households have higher likelihood of reporting IPV than those living in advantaged circumstances. The results also show differences in IPV between neighborhoods and between states that are partially explained by state levels of gender inequality. The results suggest that changing cultural norms to promote the status of women and increasing the educational and economic opportunities for all people could decrease the prevalence of IPV.     

Who Lives on the Wrong Side of the Environmental Tracks? Evidence from the EPA's Risk‐Screening Environmental Indicators Model*

Objective. We analyze the social and economic correlates of air pollution exposure in U.S. cities. Methods. We combine 1990 Census block group data for urbanized areas with 1998 data on toxicity‐adjusted exposure to air pollution. Using a unique data set created as a byproduct of the EPA's Risk‐Screening Environmental Indicators Model, we improve on previous studies of environmental inequality in three ways. First, where previous studies focus on the proximity to point sources and the total mass of pollutants released, our measure of toxic exposure reflects atmospheric dispersion and chemical toxicity. Second, we analyze the data at a fine level of geographic resolution. Third, we control for substantial regional variations in pollution, allowing us to identify exposure differences both within cities and between cities. Results. We find that African Americans tend to live both in more polluted cities in the United States and in more polluted neighborhoods within cities. Hispanics live in less polluted cities on average, but they live in more polluted areas within cities. We find an extremely consistent income‐pollution gradient, with lower‐income people significantly more exposed to pollution. Conclusions. Communities with higher concentrations of lower‐income people and people of color experience disproportionate exposure to environmental hazards. Our findings highlight the importance of controlling for interregional variation in pollution levels in studies of the demographic correlates of pollution.     

Moving Beyond Tokenism: Ratification of the Equal Rights Amendment and the Election of Women to State Legislatures*

Objective. State legislative bodies that contain more than a token level (15 percent) of female representatives provide these lawmakers with a greater sense of self‐efficacy and opportunities for wider policy influence than those where women number under 15 percent. The objective of this study is to determine the set of factors that carry states across this critical threshold, with a particular emphasis on the political mobilization effects of the Equal Rights Amendment (ERA) ratification drive. Method. This study used event‐history analysis methods on state‐level data collected from 1972–2000. Results. I find that states that ratified the ERA, but not states that ratified only later to rescind, had a higher likelihood of crossing this token threshold as compared with states that never ratified at all. These results obtain even after controlling for the social eligibility pool of female candidates, the political opportunity structure, the social context of each state, and preexisting levels of female representation. Conclusions. The ERA ratification campaign during the 1970s and early 1980s created long‐lasting, state‐level effects in electing women through its role as a political education tool as well as through its symbolic power.