Columbia University

^*Without implication, the author is grateful to Richard R. Nelson, Douglas A. Chalmers, Robert Y. Shapiro, Brendan O'Flaherty, Alessandra Casella, Lauren Paige Kennedy, and an anonymous referee for helpful comments on this study.

Abstract

Econometric studies of income distribution that include institutional determinants suffer from specification bias—economists do not consider a more complete ensemble of factors that possibly influence equality. While there is no "true" specification, panel and time-series regressions indicate a comparatively robust positive relationship between fiscal federalism and equitable income distribution. Surprisingly, no compelling evidence suggests any correlation with regime-type, labor organization or "Left" government partisanship. Also, among common economic determinants, these results contradict Kuznet's thesis and the hypothesis regarding population growth. Less consistent evidence confirms enduring views regarding government spending and openness to international trade.