Income inequality, government expenditures and growth
AbstractThis paper investigates the relationship between income inequality and growth by utilizing the recently published Deininger-Squire data set. Most of the recent empirical growth literature suggests a negative relationship between inequality and growth on the basis of reduced-form growth equations. This is also found in the author's study. Some effort is made to discuss the argument behind the perceived negative relationship between inequality and growth. According to the fiscal policy approach a high level of income inequality leads to a higher demand for redistribution, which in turn affects growth through resource allocation out of investment or through incentive-distorting taxes needed to fund the redistribution. It is suggested that the last-mentioned relationship between government expenditure and growth is more likely to be non-linear; positive with small amounts and negative with large amounts. Such a relationship, however, is only found for public goods. Thus, government expenditure on 'law and order' may, with higher amounts of expenditure, have negative effects on growth, therefore indirectly supporting the socio-political stability argument.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics.
Volume (Year): 31 (1999)
Issue (Month): 9 ()
Contact details of provider:
Web page: http://www.tandfonline.com/RAEC20
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Odedokun, Matthew & Round, Jeffery I., 2001. "Determinants of Income Inequality and its Effects on Economic Growth: Evidence from African Countries," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
- International Monetary Fund, 2003.
"Income Inequality and Redistributive Government Spending,"
IMF Working Papers
03/14, International Monetary Fund.
- Luiz de Mello & Erwin R. Tiongson, 2006. "Income Inequality and Redistributive Government Spending," Public Finance Review, , vol. 34(3), pages 282-305, May.
- Xavier Ramos & Oriol Roca-Sagales, 2007. "Long Term Effects of Fiscal Policy on the Size and the Distribution of the Pie in the UK," RSCAS Working Papers 2007/39, European University Institute.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.