Europe Primarily Uses the Welfare State to Fight Inequality

Some economists argue that European countries have lower inequality than the US because they distribute market income much more equally, not because of their welfare states. This is false: the welfare state beats market-income compression.

In a recent piece, Virgilio Urbina Lazardi argues that European countries have lower inequality than the United States because they distribute market income much more equally, not because of their welfare states.

A paper published a few years ago in the American Economic Journal has raised eyebrows within and outside of the profession. Combining national accounts data with household surveys, its authors found that the United States redistributed a greater share of its gross domestic product through taxes and transfers to its poor than any of its wealth