Distribution and redistribution in postindustrial democracies

This article analyzes the processes of distribution and redistribution in postindustrial democracies. The authors combine a pooled time-series data base on welfare state effort and its determinants assembled by Huber, Ragin, and Stephens (1997) with data on income distribution assembled in the Luxembourg Income Survey (Lis) archive. In the case of the Lis data, the authors recalculate the microdata in order to remove the distorting influence of pensioners on pretax, pretransfer income distribution. They examine the determinants of two dependent variables: pretax, pretransfer income inequality and the proportional reduction in inequality from pre- to post-tax and transfer inequality. They test hypotheses derived from power resources theory against alternatives derived from the literature on the development of the welfare state and the determinants of income inequality. The results offer strong support for power resources theory, particularly in the case of reduction in inequality. Union density, unemployment, and percentage of female-headed households were the main determinants of pre-tax and transfer inequality (R-2 = .64), while leftist government, directly and indirectly through its influence on the size of the welfare state, was found to be by far the strongest determinant of distribution (R-2 = .81).