Resumen

This paper analyzes a recently-compiled cross-country dataset that distinguishes market (before taxes and transfers) inequality from net (after taxes and transfers) inequality and allows to calculate redistributive transfers for a large number of country-year observations.

Main findings are: (i) More unequal societies tend to redistribute more. It is thus important in understanding the growth-inequality relationship to distinguish between market and net inequality; (ii) lower net inequality is robustly correlated with faster and more durable growth, for a given level of redistribution; (iii) redistribution appears generally benign in terms of its impact on growth; only in extreme cases is there some evidence that it may have direct negative effects on growth. Thus the combined direct and indirect effects of redistribution - including the growth effects of the resulting lower inequality - are on average pro-growth.

The authors mention the need to recognize the inherent limitations of the data set and of cross-country regression analysis more generally. They also point out the need of being careful of not assuming that there is a big trade-off between redistribution and growth given the fact that available macroeconomic data does not support that conclusion.