| In recent years,many countries,including established liberal democracies,experienced the rise of populism,political polarization,right-wing illiberalism and democratic backsliding.These processes have been linked to long-term economic and income inequality trends related to technological change,market consolidation(or rather,globalization),and to consequences of recent recessions,as well as to cultural backlash,attitudes to immigration,or the role of the internet and social media.However,there are many researchers blame this for weakening of fiscal redistribution in the past several decades.This paper attempts to answer the following three questions: first,how to design fiscal policy to minimize income inequality(i.e.,the problem of optimal fiscal redistribution);the second is whether the fiscal system(especially China’s)has reduced income inequality(i.e.,the measurement of fiscal redistribution)over the past four decades;the third is why fiscal redistribution is different in different countries and in different periods of the same country(that is,the influencing factors of fiscal redistribution).This paper defines fiscal distribution as the process by which the state collects revenues from individuals and households(primarily through taxes and fees)and spends these revenues on benefits(for example,cash transfers,price subsidies,and in-kind benefits such as education and health)intended for specific individuals and households.In so doing,the state changes the postfiscal income distribution and poverty rates that would have prevailed in the absence of fiscal policy.Based on this definition,the work done in this paper mainly includes the following aspects.In terms of the theory of fiscal redistribution,this paper first decomposes fiscal redistribution into fiscal effort(or the size of government)and fiscal progressivity,then discusses the decision of optimal fiscal effort(or the size of government)and optimal fiscal progressivity respectively,and finally discusses fiscal redistribution under different political regimes based on political economy models.The study finds that: first,the relationship between economic development and fiscal redistribution is not clear,and the interaction between them is also affected by income inequality and political system;Second,income inequality increases fiscal redistribution in many cases,but this effect is limited by the political regimes;third,democratization(which means the expansion of voting rights/the extension of franchises)can help increase fiscal redistribution,but a variety of factors may hinder this effect,such as the capture of democracy by elites(and constraints on redistribution),the development of(inequality-increasing)market economy(/opportunities),and voters’ misperception(such as middle-class bias);Fourth,social preferences have an important impact on fiscal redistribution;finally,China’s current level of fiscal progressivity is below optimal levels,and reforms to increase fiscal progressivity could bring considerable social welfare benefits.As for the measurement of fiscal redistribution,this paper measures China’s fiscal redistribution from 1978 to 2020 and the fiscal redistribution of over 190countries(regions)in the world from 1960 to 2020 based on the standard fiscal incidence analysis framework.The study finds that: first,China’s fiscal redistribution experienced two major declines in the mid-1980 s and turn of the century,and recovered after the 18 th National Congress of the Communist Party of China(2012);second,the fiscal systems of most countries(regions)play a role in redistribute income,but the fiscal redistribution of a considerable number of countries(regions)is not strong enough to reduce their income inequality below the international warning line(such as China).For the influencing factors of fiscal redistribution,this paper evaluates the effects of economic development,income inequality,political system,preferences for redistribution and globalization on fiscal redistribution.In this section,the main findings of this paper are as follows:First,the impact of economic development on fiscal redistribution is U-shaped.Countries prioritize economic growth over welfare spending in the early stages of economic development,so income levels reduce fiscal redistribution in the first place(Vu,2022);as income levels rise further,demand and support for fiscal redistribution gradually increase,eventually increasing fiscal redistribution.Thus,empirical evidence supports the Kuznets hypothesis of fiscal redistribution.Second,market income inequality has significantly increased fiscal redistribution across countries.This conclusion is robust in a variety of settings.Moreover,the paper finds that,on a global scale,it is actual income inequality,instead of perceived income inequality among residents,that influences fiscal redistribution.This means that around the world,the widespread underestimation of income inequality does not seem to have had too bad policy consequences.In addition,the mechanism analysis section finds that income inequality affects fiscal redistribution mainly by affecting fiscal spending,especially social spending.Third,political institutions have an important impact on fiscal redistribution,but unlike the predictions of the classical political-economic model of redistribution,namely the Meltzer and Richard(1981)model,we do not find that democratization has a significant effect on fiscal redistribution.Interestingly,the collapse of democracy can significantly undermine fiscal redistribution.Moreover,for democracies,the policy preferences of governments and political parties have an important impact,with left-wing governments and parties always inclined to implement more fiscal redistribution.Governments in non-democracies also respond to the redistributive needs of the population,especially in the run-up to elections.Fourth,the evidence on the extent to which the redistributive preferences of national residents influence fiscal redistribution is very vague.At the micro level,this paper finds that demographic factors(such as age,gender,education level),income,social class,religious beliefs,and political beliefs(left/right)all influence individuals’ redistributive preferences.At the macro level,factors such as ethnic/linguistic religious differentiation,shadow economic size,etc.also have an important impact,while culture(individualism/collectivism;traditional/secular rationality and survival/self-expression values)do not seem to have a significant impact.This paper then finds that fiscal redistribution in various countries does not respond strongly to residents’ redistribution preferences.Fifth,research on the effects of globalization suggests that the world may have become flatter since globalization,but it has also become more unequal.The estimates in this paper show that globalization has significantly reduced fiscal redistribution,especially during the period of so-called "hyper-globalization"(i.e.1992-2007)when globalization was booming;Compensatory and disciplinary/efficiency effects coexist,but the effects vary from time to time and from country to country,governments and citizens do not respond strongly to globalization,and the decline in fiscal redistribution during the "hyper-globalization" period is mainly caused by the discipline/efficiency effect.This paper has important policy implications for improving China’s redistribution,promoting common prosperity,and reforming fiscal redistribution systems in countries around the world.For China,our findings call for more fiscal redistribution,a more progressive tax system,and larger and more precise transfers.Based on the above conclusions,this paper puts forward two suggestions: on the one hand,it is necessary to increase the progressivity of taxation(especially the progressivity of income tax),and strengthen the regulation and regulation of high income;On the other hand,it is necessary to expand the scale and accuracy of social security and transfer payments,and promote the equalization of basic public services.For countries around the world,this study does not attempt to provide a blueprint or roadmap for reforming the redistribution system,but only to show a magnificent picture of how economic development,widening income inequality,changes in political regimes,variances in residents’ redistributive preferences,and the evolution of globalization and fiscal redistribution have interacted over the past few decades.This paper has the following policy implications.First,the decline of redistribution with the growth of per capita GDP in the early stages of development does not mean that the market economy will necessarily deteriorate income distribution.Further increases in per capita GDP will increase redistribution after a certain stage of development,and this does not mean that only countries that have crossed the "middle-income trap" need to pay attention to income inequality.It is true that national policies can have different priorities at different stages of economic development,but the focus on efficiency and equity should be carried out throughout.Second,the implication is twofold that redistributive policies in countries,especially in non-OECD countries,are not responsive to people’s needs.From the supply side of redistribution(government),this reflects problems in the political system(preference aggregation mechanism),institutional quality,and policymaking.On the demand side of redistribution(people),the general underestimation of real inequalities reflects deficiencies in access to information and mass education.Third,the fact that the current political systems and fiscal redistribution in various countries do not respond well to the redistributive needs of the people is a worldwide problem,not unique to democratic or non-democratic countries.Fourth,public policy should pay more attention to the losers of globalization,who do not necessarily exhibit higher redistributive preferences themselves,but mitigating its negative effects through transfer policies and other labor market policies is important to reduce income inequality and promote economic growth.Finally,the situation in developed and developing countries is very different,so countries should reform their fiscal redistribution systems according to their own conditions,and there may not be a "one-size-fits-all" reform proposal. |
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