American Economic Journal:
Applied Economics
ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)
Why Is Europe More Equal than the United States?
American Economic Journal: Applied Economics
vol. 14,
no. 4, October 2022
(pp. 480–518)
Abstract
This article combines all available data to produce pretax and posttax income inequality series in 26 European countries from 1980 to 2017. Our estimates are consistent with macroeconomic growth and comparable with US distributional national accounts. Inequality grew in nearly all European countries, but much less than in the US. Contrary to a widespread view, we demonstrate that Europe's lower inequality levels cannot be explained by more equalizing tax and transfer systems. After accounting for indirect taxes and in-kind transfers, the US redistributes a greater share of national income to low-income groups than any European country. "Predistribution," not "redistribution," explains why Europe is less unequal than the United States.Citation
Blanchet, Thomas, Lucas Chancel, and Amory Gethin. 2022. "Why Is Europe More Equal than the United States?" American Economic Journal: Applied Economics 14 (4): 480–518. DOI: 10.1257/app.20200703Additional Materials
JEL Classification
- D31 Personal Income, Wealth, and Their Distributions
- E01 Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
- H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H50 National Government Expenditures and Related Policies: General
- I38 Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs