in Comparative Perspective
One of the big controversies about inequality concerns its implications for economic efficiency and growth and, by extension, its implications for average living standards. Most of us would agree that a more egalitarian society is preferable to a less egalitarian society, everything being equal. But if we care about the welfare of people at the bottom of the socio-economic hierarchy, we must care about average living standards as well as the distribution of living standards across the socio-economic hierarchy. Put differently, we must care about the median income as well as the distance between the median and the bottom.
Consider two hypothetical countries with a median household income of $20,000 and identical distributions of market income.1 With poverty defined as a household income of less than 40 percent of the median household income, 20 percent of the population lives in “poor” households before taxes and transfers. While country A engages in redistributive tax and spending policies that bring the poverty rate down to 10 percent, country B does not engage in any redistribution and so the poverty rate remains 20 percent. In an immediate sense, the poor are better off in country A than in country B. But suppose that redistribution by the government has
Jonas Pontusson is a professor of comparative politics at the University of
Geneva. He received the American Political Science Association’s Gladys M.
Kemmerer Award for Inequality and Prosperity: Social Europe Versus Liberal
America (2005) and the Heinz Eulau Award for “The American Welfare State
in Comparative Perspective” (Perspectives on Politics, 2006). Coauthored with
Noam Lupu, his most recent article, “The Structure of Inequality and the Politics
of Redistribution,” appeared in American Political Science Review.