Further evidence of the relationship between social transfers and income inequality in OECD countries

Giorgio d'Agostino, Luca Pieroni and Margherita Scarlato

No 482, Working Papers from ECINEQ, Society for the Study of Economic Inequality

Abstract: In this paper, we have revised the estimates of the effects of social transfers on income inequality. We have accounted for reverse causality using an instrumental variable derived via a theoretical model, which identifies the main driver of social transfers from the interaction between the electoral system and the coalition or party winning the election, and have estimated, in the OECD countries, that a 1\% increase in the share of social transfers reduces income inequality by one-half of a percentage point. This result appears to be robust to different components of expenditure, alternative model specifications and falsification tests. Only countries with a high corruption level appear to violate this empirical regularity. Our estimates show that bureaucratic inefficiencies caused by corruption are responsible for the lack of benefit of social transfers on economic inequality.

Keywords: Welfare policy; social spending; income inequality; instrumental variable estimation. (search for similar items in EconPapers)
JEL-codes: C26 H53 I38 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2018-11
New Economics Papers: this item is included in nep-eec
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.ecineq.org/milano/WP/ECINEQ2018-482.pdf (application/pdf)

Related works:
Working Paper: Further evidence of the relationship between social transfers and income inequality in OECD countries (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inq:inqwps:ecineq2018-482

Access Statistics for this paper

More papers in Working Papers from ECINEQ, Society for the Study of Economic Inequality Contact information at EDIRC.
Bibliographic data for series maintained by Maria Ana Lugo ( this e-mail address is bad, please contact ).