No abstract

The growth of the American financial services remains a bit of a puzzle. The standard approach, the deregulation hypothesis, posits that the industry expanded in response to national deregulation. Yet, when viewed in a comparative context, US finance was deregulated significantly less than other national financial systems and yet grew significantly more than most. We propose the global deregulation hypothesis as a solution to this puzzle. The hypothesis posits that American finance grew in response to deregulation in Europe and the emerging market economies. The article develops two theoretical mechanisms that link global deregulation to US financialization. It reports statistical tests that support two central implications of the global deregulation hypothesis. First, global deregulation is positively associated with the growth of US financial services, while US deregulation is not. Second, global deregulation is not systematically related to the growth of financial services in other industrial democracies.

The welfare state literature has largely ignored the impact of a country's quality of government on its levels of redistribution. Using cross-sectional time-series analysis of twenty-one Central and Eastern European countries, this article shows that environments characterized by higher levels of corruption, rampant bureaucratic inefficiency and ineffective enforcement of the rule of law are associated with lower levels of redistribution. Poor government directly affects the supply side of the redistribution process by hindering countries’ ability to allocate funds to redistribution and deliver them to their beneficiaries. Contrary to existing demand-oriented perspectives, the proposed causal mechanism does not blame lower redistribution on the lack of public support for the welfare state. Rather, it focuses on the capacity of states to adopt and implement inequality-reducing policies. The results are robust to numerous extensions and model specifications.

This paper examines the political determinants of income composition inequality in 32 advanced and emerging economies between 2006 and 2018. Income composition inequality is defined as the extent to which the income composition in capital and labor income is unevenly distributed across the income distribution. High levels of income composition inequality are associated with class-fragmented societies, whereas low levels are typical of multiple-sources-of-income societies. We find that a higher seat share of left parties in the governing coalition and higher globalization, as measured by trade, capital openness, and FDI inflows, are linked to lower income composition inequality. Higher economic development and a higher capital income share are, instead, related to higher inequality in income composition. We discuss the mechanisms behind these relationships and check the robustness of our findings. To our knowledge, this is one of the first studies looking into the causes of the dynamics of this dimension of economic inequality. (Stone Center on Socio-Economic Inequality Working Paper)