side variable of interest, increases. The regressions also control for income and demographics, as previously described.<sup>14</sup> The first two columns of Table 1 focus only on those countries where we have data on both gross and disposable incomes (called “sample A”) and are most similar to the sample in the earlier research (almost all from the LIS, including the most recent additions, bringing the total to 32). Following Milanovic (2010), we look at the effect of initial market income shares on redistribution by comparing disposable and market incomes in this sample. As in Milanovic’s (2010) analysis and for a similar sample of countries, the coefficient on _marketP_ income share is always negative and highly significant. The more unequal is market income distribution (e.g., the smaller the share of the bottom quintile or the larger the share of the top quintile), the larger is _sharegain_ (with larger redistribution to poorer quintiles and away from richer quintiles). Note that for the bottom quintile, the results indicate that redistribution almost fully compensates for a lower _marketP_ income share: every percentage point by which the market income share of the poorest quintile falls is matched by a 0.94 percentage point increase in the share of that quintile after taxes and transfers. None of the control variables is significant.

The estimates in the third and fourth columns include all countries in our database, including many from Latin America and two from Africa (4 observations from Côte d'Ivoire and 2 from Ghana). There are also 15 observations from Asia. Since many of these lack data on direct taxation, we examine the effect of redistribution by comparing gross and market incomes. The results now refer to the _sharegain_ from social transfers only, that is, for the _sharegain_ realized as we move from _marketP_ income to gross income.

The results in columns three and four show that for this larger sample of countries, and focusing on gross rather than disposable incomes, the market income shares of the bottom and top quintiles continue to have a significant, negative effect on redistribution: the higher is quintile’s share of total market income, the lower are transfers to these households. The coefficients are smaller in absoluter terms, however: -0.73 instead of -0.94 for the bottom quintile and -0.12 instead of -0.42 for the top.

Columns three and four indicate that gross incomes are sufficient to capture redistribution, though coefficient values are lower. They show the “muted” effect of redistribution, since they do not account for the effect of direct taxes. However, these differences could be driven by the larger sample of countries in columns three and four, rather than by the use of gross incomes in those regressions. To verify that gross incomes do a reasonable job of capturing post-redistribution income shares, the final two columns return to the sample of countries with disposable incomes. This time, however, we examine the effects of market income shares on gross income shares using sample A only.

The specifications in the last two columns measure redistribution using gross incomes, as in columns three and four, but are estimated only for those countries that have data on disposable incomes – those in columns one and two. The results are nearly the same across columns one and two and columns five and six. This suggests that the use of gross incomes rather than disposable incomes is unlikely to have a material effect on our analysis.

> 14 Openness, defined as exports plus imports over GDP, takes into account Rodrik's (1998 ) hypothesis that more open economies, presumably more likely to experience income fluctuations, will also tend to be more redistributive in order to protect its population from wide income swings.  We found that openness has no effect on _sharegain_ in any specification, however, and omit it here.

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