Inequality, poverty and the composition of redistribution

Costas-Fernandez, Julián and Lodato, Simon ORCID logoORCID: https://orcid.org/0000-0002-7536-527X (2022) Inequality, poverty and the composition of redistribution. Social Choice and Welfare . ISSN 0176-1714 [Article] (Published online first) (doi:10.1007/s00355-022-01415-5)

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Abstract

We study the use of social expenditures and regulation for redistribution. When regulated goods are essential in the consumption bundle of the poor, a high poverty rate creates incentives to increase redistribution through regulation. By contrast, inequality directs redistribution towards social expenditures. We propose a theoretical model that captures the trade-off between these two redistributive policies and test the model implications with a novel municipality dataset on income and local government policies. Theory predicts and empirical evidence supports that failing to account for poverty biases the effect of inequality on redistribution. Our evidence also reflects the positive connection between poverty and the use of regulation for redistribution.

Item Type: Article
Research Areas: A. > Business School > Economics
Item ID: 35064
Notes on copyright: © The Author(s) 2022
Open Access This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/
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Depositing User: Simon Lodato
Date Deposited: 25 May 2022 10:19
Last Modified: 21 Jun 2022 04:35
URI: https://eprints.mdx.ac.uk/id/eprint/35064

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