Distributive mechanisms of the welfare state—a formal analysis and an empirical application

The problem raised in this article is how to conceptualize and measure the redistributive effects of the public sector. First, a formal model is developed. The model is used to illuminate some logical relationships between basic variables affecting distribution of income. Secondly, the model is used for the construction of various empirical indicators of the redistributive effects of the public sector. Thirdly, empirical illustrations are given from Sweden in 1967 and 1980. The conclusion is that the circulation of money and the distribution of transfers ‘in kind’ through the public sector have equalizing net effects. The poorest half of the population has its income increased by 32 per cent in 1967 and 75 per cent in 1980 through transfers from the rich half, via the public sector; workers have their income increased by 10 per cent in 1967 and by 16 per cent in 1980 through transfers from the other classes. The increase in redistributive effect of the public sector between these two years is mainly due to the increase in its size and not to a more pronounced distributional profile