likely to be small compared to the redistributive transfers: a one dollar increase in unemployment insurance leads to far less than a one dollar reduction in recipient’s market income.

Third, there is unlikely to be an unobserved correlation between the incentive effects of redistribution and the political conditions that favor redistribution. We would be concerned about bias if the political conditions that give rise to redistribution are more likely to exist in countries where citizens’ incentives to work are more strongly affected by the prospect of redistributive transfers. It is implausible, however, that the work effort of citizens in older democracies, for example, is more sensitive to transfers than citizens in younger democracies.

Finally, fourth, theories describing the effects of political conditions (such as democratization) on redistribution apply no less to measures of redistribution that include incentive effects than to measures that exclude them. The political decision to undertake redistribution must also take into account an estimate of the incentive effects. It is implausible to argue that political decisions on taxes and transfers systematically neglect the incentive effects of these policies.<sup>11</sup>

# Political and other variables

The political variables used in the analysis are drawn from the 2012 version of the Database of Political Institutions (Beck, et al. 2001). The two variables of greatest interest are measures of the partisan tendencies and age of the largest government party. The partisan variable allows us to identify the governing party of a country as right, left, center or non-programmatic on economic issues. In the analysis below, we identify partisan effects by asking how redistribution in a country changes when the largest government party is left wing. We then ask whether this effect is attenuated by also accounting for the age of this party.

The effects of party age could be conflated with the maturity of the political system generally. To control for this possibility, all specifications include a control for the number of years of continuous competitive elections (see, e.g., Keefer 2007). This variable is set to one in the first year that two DPI variables, the Legislative and Executive Indices of Competitive Elections, equal their highest score, seven. It increases by one with every additional year that they both remain at seven. The variable reverts to zero when either of these falls below seven.<sup>12</sup> In one set of specifications, we include all country observations in the regressions, some of which do not have fully competitive elections, to check the impact of competitive elections, _per se_ , on redistribution. Because relatively few observations are “non-democratic” in this sense, these results are more illustrative and point to future research. The DPI regime type measures have two advantages over others: they are objective and, by focusing only on elections, they allow for more direct tests of the theoretical propositions linking inequality and regime type, which refer explicitly to competitive elections.

All specifications control for the log of real, purchasing power parity adjusted, per capita income, both because the inequality of market incomes is a function of average income, and because the capacity of countries to redistribute is likely to be a function of country income. Pressures for

> 11 This and other possible biases are more fully discussed in Milanovic (2010).

> 12 The two DPI variables are the Legislative and Executive Indices of Competitive Elections (LIEC, EIEC).  These range from one (no elections) to seven (multiple parties can and do compete and no party gets more than 75 percent of the votes or legislative seats).  Countries are coded as democratic in the analysis here when LIEC and EIEC are both coded seven.

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