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Abstract: We examine the empirical relationship between the institutions of economic freedom and labor shares in a panel of up to 93 countries covering 1970 through 2009. We find that a standard deviation increase in the Fraser Institute's Economic Freedom of the World (EFW) score is associated with about a 1/3 standard deviation increase in a country's labor share. Starting from the sample mean labor share in our panel, this amounts to about 4.26percentage points. This relationship is robust to considering OECD and non-OECD samples separately. It is also (both qualitatively and quantitatively) robust to controlling for differences in human capital levels, labor productivity, trade union density, and international economic flows. Breaking the EFW into its individual component areas, the regulation of credit, business and labor appears to be the most important source of the positive EFW–labor share relationship. [Copyright &y& Elsevier]

The median voter theorem suggests that a majority vote over a linear tax-cum-transfer scheme results in egalitarianism if the median of the income distribution is poorer than the average. However, although most real-world income distributions are markedly skewed to the right, radical redistribution is rather an exception than the norm. In this paper we review the theoretical arguments that explain limited redistribution as an outcome of the political process. The contributions are classified into two categories, according to whether it is the properties of the political process that prevent the poor from politically implementing their will, or whether it is in the self-interest of the poor to refrain from radical redistribution. [Copyright &y& Elsevier]