Inequality, public opinion and redistribution

According to the "median-voter" hypothesis, greater inequality in the market distribution of earnings or income tends to produce greater generosity in redistributive policy.We outline the steps in the causal chain specified by the hypothesis and attempt to assess these steps empirically.Prior studies focusing on cross-country variation have found little support for the median-voter model.We examine over-time trends in eight nations during the 1980s and 1990s.Here too the median-voter hypothesis appears to have little utility.Income inequality has two components: (1) "market" inequality and (2) government redistribution via taxes and transfers.In principle, the two can be combined in any of a variety of ways: low market inequality with high redistribution, low market inequality with low redistribution, high market inequality with moderate redistribution, and so on.Of particular interest in the study of inequality is what happens when market inequality is high or increases.Does government compensate with high redistribution in order to secure a relatively egalitarian distribution of posttax-posttransfer income?According to one influential theoretical approach, that is indeed what tends to happen.This approach is based on a median-voter model of the politics of redistribution.Its best-known exposition is by Allan Meltzer and Scott Richard (1981).A higher level of market inequality implies a greater distance between