Influence Of Government Size On Income Distribution

I have been reading Philip A. Klein's Economics Confronts the Economy (Edward Elgar, 2006). He presents data in two tables that I thought, when combined, suggest relationships. So I drew the regression lines below. The data on income distribution is from 1998. Total government expenditures as a percentage of GDP is from 1999. Government expenditures include, for example state and local spending in the United States. The graphed data are for the United States, and, in order of decreasing percentage of government spending as a percentage of Gross Domestic Product, Sweden, Denmark, Belgium, Finland, France, Austria, Italy, Netherlands, Norway, Canada, Germany, New Zealand, the United Kingdom, Spain, Ireland, Australia, and Japan. Apparently, in advanced industrial democracies, as government spending directs a greater percentage of resources, the poorest have relatively more income and the richest have relatively less. One can see why the richest would like lackeys to fight the latter tendency.

Figure 1: Share of Income in Lowest 10% Among Developed Economies

Figure 2: Share of Income in Highest 10% Among Developed Economies

I haven't finished Klein's book, but I think I'll note two points I find of interest. He argues that when economists advocate for positive analysis of existing economies, they implicitly accept the status quo. This is a value judgement that could be contested. Secondly, when economists limit normative theory to Pareto-improving recommendations, they restrict themselves from commenting on such matters as income distribution and the quality of life of the vast population. (Moving along one of the regression lines probably makes some worse off.)