Income Inequality and Redistribution in Multilevel Perspective

A substantial body of scholarship has focused on the widening gap between ‘left-behind’ regions in the deindustrializing periphery and the – mostly urban – regions that have been driving post-industrial economic growth. Within-region inequality, however, has been frequently understudied in the literature, despite recent research identifying it an important driver of overall country-level inequality. This paper represents the first study of the determinants of subnational working age market income inequality and inequality reduction (i.e. redistribution), using a novel dataset created by harmonizing microdata from the Luxembourg Income Study (LIS) and Eurostat Standards of Income and Living Conditions (SILC), among 199 regions in 13 countries between 1990 and 2010. I find that need (unemployment rates, employment rates and the percentage of children in single mother households) is a major predictor of subnational working age pre-tax and transfer income inequality, confirming that some national-level dynamics are also present within regions. With respect to working age inequality reduction, I find that the volume of work within regions as measured by employment and unemployment rates significantly predict regional redistribution. Politically, left-wing government incumbency at the regional level increases regional redistribution; and this effect is strengthened by ideological proximity between the regional and national governments and by the relative wealth of the region. This suggests that subnational governments can have an important role to play in reducing inequality, and provides a foundation for a research agenda which can combat the ‘methodological nationalism’ (Jeffery & Schakel 2013) historically present in inequality studies.