Redistribution in the 19th Century: A New Measurement and Initial Results

This paper presents a new measurement of redistribution based on a typology of taxation and spending. A popular method for measuring the redistributive impact of policy is how the Gini-coefficient changes after taxes and transfers. This has two main drawbacks. First, individual citizens have limited information about the national Gini-coefficient and it is unclear how changes in this aggregate measure affect preferences. Second, high-quality estimates of Gini-coefficients are not available for large samples over a longer period of time. In addition, the initial distribution of income (or wealth) affects the estimate of redistribution. In this paper I develop an alternative measurement of government redistributive efforts based on a simple classification of the relative progressiveness and regressiveness of taxation and spending. For example, a value-added tax is less redistributive than a progressive income tax and transfers proportional to income are less redistributive than flat rate benefits. If the main expenditure is on public goods (e.g. national defense), the impact of the revenue side on redistribution becomes more important. Added together this creates a picture of the redistributive impact of the state budget on both the revenue and expenditure sides. This simple classification makes it possible to collect comparable historical data going back to the nineteenth century. The paper provides initial data and analysis for a smaller number of states from 1800 to 2012 concerning the relationship between democracy and redistribution.