“Trickle-Down Redistribution: Revisiting the Pattern and Politics of Rising Inequality in Rich Democracies,” Philipp Rehm, JHU

AMERICAN POLITICAL ECONOMY EXCHANGE LUNCHEON EVENT

Abstract: Market income inequality has increased in most rich democracies. The degree to which tax-and transfer-systems have responded is less clear. The prevailing view is that redistribution is lower when and where inequality is higher—the so-called Robin Hood Paradox. Yet new inequality data call this into doubt. This paper re-examines the relationship between inequality and redistribution in 23 rich democracies, probing the best available data with multiple operationalizations and estimation strategies. Our analyses overwhelmingly find a positive relationship between inequality and redistribution, contra the Robin Hood Paradox. However, our findings also call into question the standard explanation of this redistribution: that the electorally pivotal middle class has successfully demanded compensation. Instead, we show that the increase in redistribution appears mostly driven by policy drift, as relatively stable tax-and-transfer systems confront rising inequality, rather than by democratically responsive policy changes. More important, this “automatic redistribution” has coexisted with a substantial increase in post-tax and -transfer inequality in most rich democracies—an outcome that suggests the disproportionate power of the affluent.

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Philipp Rehm is Professor of Political Science at Johns Hopkins University; previously, he was professor at Ohio State University and held the Postdoctoral Prize Research Fellowship at Nuffield College, Oxford University. In particular, he is interested in the causes and consequences of income dynamics (such as income loss, income volatility, and risk exposure). At the micro-level, his research explores how income dynamics shape individual preferences for redistribution, social policies, and parties. At the macro-level, his work analyzes the impact of labor market and income dynamics on polarization, electoral majorities, and coalitions underpinning social policy.