Scandinavian Working Papers in Economics

Memorandum,
Oslo University, Department of Economics

No 16/2004: Globalisation, inequality and redistribution

Kjetil Bjorvatn () and Alexander Cappelen ()
Additional contact information
Kjetil Bjorvatn: Norwegian School of Economics and Business Administration, Postal: NHH, Helleveien 30, NO-5045 Bergen
Alexander Cappelen: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway

Abstract: The present paper seeks to explain the pattern of income redistribution in a globalised world of increased market income inequality and lower costs of factor mobility. In some countries, larger market income inequality has been met by an increased redistributive effort, thus keeping the distribution of disposable incomes relatively stable. In other countries, larger market inequality has been accompanied by a reduction in transfers, thus leading to growth in disposable income inequality. In our model, the initial level of market income inequality is crucial in explaining how an increase in this variable affects redistribution.

Keywords: Globalisation; Inequality; Redistribution; Majority voting

JEL-codes: F21

17 pages, October 27, 2004

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