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This paper uses pseudo panel techniques and a fixed effects estimator to analyse the determinants of preferences for redistribution in 34 European countries over the period 2002–2012. The data is drawn from the six available waves of the European Social Survey. The main result is that changes in income inequality positively affect changes in preferences for redistribution over time. Though this result is predicted by standard political economy models, it has found little previous empirical support. This study shows that, at least in Europe, growing income inequality leads to more individual support for redistribution. The empirical results hold after performing a variety of robustness checks regarding the construction of pseudo panels, the use of lags and different measures of income inequality.

This paper asks whether there are welfare gains from additional redistribution. First, it derives a sufficient condition for the existence of welfare gains from a small increase in lump-sum transfers financed by a uniform increase in labor income taxes. A calibration suggests that, even under very conservative assumptions, most countries would benefit from such a scheme. Second, it asks whether, given existing tax revenues, there are gains from diverting public funds from government investment projects toward redistributive programs. The analysis suggests that the answer is highly sensitive to parameter values and the rate of return on government investment.

This paper investigates the major drivers of governmental redistribution. We retest the Meltzer-Richard hypothesis and account for a plethora of political, institutional, and cultural forces that influence the scope of redistribution. Extended and harmonized data on effective redistribution recently provided by the SWIID allows for the assessment of the origins of governmental redistribution for a broad sample of countries. Our results confirm the Meltzer-Richard hypothesis, indicating that the link between market inequality and redistribution is even stronger when using perceived inequality measures. We support the decisive role of the median voter, though also approving a crucial role of top incomes. Political and institutional conditions as well as cultural aspects significantly influence governments in their decisions regarding the amount of redistribution.