Bradley, David Huber, Evelyne Moller, Stephanie Nielsen, Francois Stephens, John
Year of Publication:
LIS Working Paper Series 265
This paper analyzes the processes of distribution and redistribution in post-industrial democracies. We combine a pooled time series data base on welfare state effort and its determinants assembled by Huber, Ragin, and Stephens (1997) with data on income distribution assembled in the Luxembourg Income Survey (LIS) archive. In the case of the LIS data, we re-calculate the micro-data in order to remove the distorting influence of pensioners on pre-tax, pre transfer income distribution. We examine the determinants of three dependent variables: pre-tax, pre-transfer income inequality, post- tax, post transfer income inequality and the proportional reduction in inequality from pre to post tax and transfer inequality. We hypothesized that pre-tax, pre-transfer income inequality would be determined by labor market institutions (union density, bargaining centralization), labor market conditions (unemployment), and economic structures (post-industrialism, third world imports). We hypothesized that the reduction in inequality would be determined by political configurations: directly by left government and indirectly via their effect on welfare state generosity by left government and Christian democratic government. Post tax and transfer income inequality was hypothesized to be a product of the combination of labor market variables and political variables. The results broadly confirms our hypotheses and the overall fit is very good.