These examples show that governments can shape the distribution of incomes by making use of the tax and transfer systems. The experience of Brazil shows that even developing countries have substantial scope for reducing inequality that emanates from the market. At times, governments can be faced with a trade-offs between equity and efficiency; but these trade-off s need not be steep, and o en equity and efficiency can go hand-in-hand. For the countries in the sample, there is no apparent correlation between overall redistribution and the growth of per capita incomes over the past two decades. Countries that achieved low inequality through high redistribution – such as Belgium, Finland, Germany and Sweden – did equally well as those with limited redistribution and higher inequality.
Political choice is thus as much a factor behind inequality as trends in the economy are. Arguably, the different choices governments make also reflect different preferences of voters. While public opinion surveys consistently show that people in Europe support redistribution of incomes from the rich to the poor, the majority in favour of redistribution is smaller in Australia and Canada. The United States is the only country in the industrialized world where those who support fiscal redistribution are outnumbered by those who think that it is not their government’s business to reduce income differences, although they agree that these are too large. The redistributive restraint that makes the United States stand apart thus finds a possible explanation in the preferences of its citizens.