The evidence on the relationship between inequality and redistributive transfers is not clearcut,
but part of the ambiguity stems from the fact that many studies are assessing imperfect
proxies for redistribution, such as social spending or tax rates (Perotti, 1996; and Bassett,
Burkett, and Putterman, 1999). While we may think of some categories of spending as
redistributive (such as education or social insurance spending), they need not be redistributive
in practice: consider spending on post-secondary education in poor countries or on social
protection for formal sector workers in many developing countries. Milanovic (2000) shows
that when direct measures of redistribution are used, the evidence is supportive of the MeltzerRichard
hypothesis: more unequal societies do engage in more redistribution.