Abstract:
This paper investigates the relationship between inequality and redistributive taxation. It provides a review of existing research on the topic and a cross-country empirical analysis of this relationship. Using data from the World Income Inequality Database, Government Revenue Dataset, and other publicly available sources, it evaluates the validity of a classic political economy argument according to which higher income inequality leads to more redistributive government policies. Extant evidence is not particularly supportive of the argument's empirical validity, but most studies to date have focused on Global North countries. This paper instead shifts the attention to the Global South, where research on the inequality-redistribution nexus has been more limited. In doing so, it considers potential alternative explanations for variation in redistribution, focusing on ethnic inequality and the conditioning role of democracy. My findings do not support the idea that income inequality determines redistribution. In contrast they suggest that ethnic inequality matters more than income inequality for redistribution in the Global South. Ethnic inequality is associated with less redistribution, and this association is stronger in more democratic countries.