Constitutional change and inequality in Scotland

Abstract

What scope does a sub-national economy have to affect the level of inequality? Does a policy menu consistent with the theories of fiscal federalism provide for an ability to affect inequality measures, or does this ability require the powers of a nation state? In this paper we discuss these questions in the context of the debate around the Scottish independence referendum, in which inequality has played a prominent role, and ask whether independence, further devolution, or simply different policies under the current constitutional framework are capable of helping Scotland transition to a less unequal income distribution. We provide a series of estimates of the impact of different policy choices upon inequality in Scotland, and discuss inequality reduction in the context of different constitutional options.