The inequality trap. A comparative analysis of social spending between 1880 and 1930

Abstract

It is often assumed that the fight against inequality played an important role in the rise of the welfare state. However, using social transfers as an indicator of redistribution and three alternative proxies for inequality¿the top income shares, the ratio of the GDP per capita to the unskilled wage, and the share of non-family farms¿this article shows that inequality did not favour the development of social policy between 1880 and 1930. On the contrary, social policy developed more easily in countries that were previously more egalitarian, suggesting that unequal societies were in a sort of inequality trap, where inequality itself was an obstacle to redistribution.