Economic inequality and public demand for redistribution: combining cross-sectional and longitudinal evidence

Alexander W. Schmidt-Catran
2014 Socio-Economic Review  
One proposition of the popular median-voter hypothesis is a positive relationship between demand for redistribution and levels of inequality. However, empirical evidence of this relationship is scarce. A major shortcoming of previous research is that it is either cross-sectional, which casts general doubt on the causal nature of the estimates, or it is longitudinal and based on aggregated data, which makes it difficult to control for compositional effects or to analyze the individual-level
more » ... cations of the hypothesis. This article estimates cross-sectional and longitudinal effects of inequality, while simultaneously controlling for the composition of data at the individual level. The article finds a positive within-country effect of inequality on demand for redistribution but no such relationship between countries. This finding points to an unobserved variable at the country level. Following the literature, the article considers welfare regimes as a possible factor capturing these unobserved country differences. However, none of the existing welfare regime typologies performs well in terms of capturing unobserved heterogeneity or in general explanatory power. All in all, the article finds robust support for the proposition that demand for redistribution is positively related to inequality, but it casts doubt on the utility of cross-sectional analysis and the welfare regime approach.
doi:10.1093/ser/mwu030 fatcat:zxszsqbluzfyxhedz7gf66bory