Income Inequality and Redistributive Government Spending

By Luiz de Mello, Erwin R. Tiongson. Social Science Research Network, 2006

170 citations recorded by the source corpus.

This article examines empirically the question of whether more unequal societies spend more on income redistribution than their more egalitarian counterparts. Theoretical arguments on this issue are inconclusive. The political economy literature suggests that redistributive spending should be higher in more unequal societies due to median voter preferences. Alternatively, it can be argued that unequal societies may spend less, not more, on redistribution because of capital market imperfections. Based on different data sources, the cross-country evidence reported in the article supports the “imperfect markets” hypothesis, showing that more unequal societies do spend less on redistribution. The empirical analysis also takes into account the fact that the share of redistributive transfers in GDP is nonnegative.

Subfields: Economics and Econometrics, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/551a77931db0fffc964362bc66a0ac7861777991

Citations in the corpus

• OECD Social , Employment and Migration Working Papers No . 163 Trends in Income Inequality and its Impact on Economic Growth (2014, unknown): “…weak evidence of a positive association between inequality and fiscal redistribution (see Perotti 1994, 1996; Persson and Tabellini, 1994, and De Mello and Tiongson, 2006 for a survey); moreover, the link between redistribution (e.g. the amount of taxes) and growth is found to be weakly…”
• Inequality and Growth: Uncovering the Main Conclusions from the Empirics (2014, unknown): “These initial studies include Li and Zou (1998), Forbes (2000), Barro (2000), and Deininger and Olinto (2000).”
• DOES GOVERNMENT SPENDING AFFECT INCOME INEQUALITY? A META‐REGRESSION ANALYSIS (2017, unknown): “…has been found by Milanovic (2000) and Ostry et al (2014), although it has been challenged by other authors (e.g. Perotti 1996, Benabou 2000, de Mello and Tiongson 2006), who argue that governments in countries where inequality is high tend to redistribute less, because political power is…”
• The Impact of Tax and Expenditure Policies on Income Disttribution: Evidence from a (2012, unknown): “For example, de Mello and Tiongson (2006) in a cross-country analysis (the sample running from 27 to 56 countries depending on availability of data) of the impact of government spending on income distribution find the overall effects to be un-equalizing.”