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Income Inequality and Redistributive Government Spending

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  • International Monetary Fund

Abstract

The paper 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 is higher in unequal societies due to median voter preferences. Alternatively, it can be argued that unequal societies may spend less on redistribution because of capital market imperfections. Based on different data sources, the cross-country evidence reported in this paper suggests that more unequal societies do spend less on redistribution.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/14.

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Length: 25
Date of creation: 01 Jan 2003
Date of revision:
Handle: RePEc:imf:imfwpa:03/14

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Keywords: Income distribution; Government expenditures; gini coefficient; dependent variable; statistics; unequal societies; social security; equations; equation; inequality data; surveys; estimation method; samples; statistic; inequality countries; high-income countries; survey; estimation technique; correlation; correlations; high-inequality countries; skewness; income inequality data; sensitivity analysis; statistical regularity; income redistribution; black market; sample size; measure of inequality; distribution of income; redistributive policies; descriptive statistics; redistributive transfers; nonlinearity; time series; world income inequality; unequal countries; predictions; social spending; parameter estimate; polarized societies; income equality; measuring income inequality; basic descriptive statistics; reducing poverty; inequality will; inequality indicators; distributive politics; black market premium; relative position; levels of inequality; inequality regressions; standard deviation; linear trend; additional regressor; independent variables; hypothesis testing; impact of inequality; inequality coefficient;

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References

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  1. Bourguignon, F. & Morrisson, C., 1995. "Inequality and Development: The Role of Dualism," DELTA Working Papers, DELTA (Ecole normale supérieure) 95-32, DELTA (Ecole normale supérieure).
  2. Lindert, Peter H., 1996. "What Limits Social Spending?," Explorations in Economic History, Elsevier, Elsevier, vol. 33(1), pages 1-34, January.
  3. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, World Bank Group, vol. 10(3), pages 565-91, September.
  4. Figini, P, 1999. "Inequality and Growth Revisited," Trinity Economics Papers, Trinity College Dublin, Department of Economics 992, Trinity College Dublin, Department of Economics.
  5. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
  6. F. C. Rodrigiuez, 1999. "Does Distributional Skewness Lead to Redistribution? Evidence from the United States," Economics and Politics, Wiley Blackwell, Wiley Blackwell, vol. 11(2), pages 171-199, 07.
  7. Alberto Alesina & Dani Rodrik, 1991. "Distributive Politics and Economic Growth," NBER Working Papers 3668, National Bureau of Economic Research, Inc.
  8. Roland Benabou, 1996. "Inequality and Growth," NBER Working Papers 5658, National Bureau of Economic Research, Inc.
  9. Gordon Tullock, 1983. "Further tests of a rational theory of the size of government," Public Choice, Springer, Springer, vol. 41(3), pages 419-421, January.
  10. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, Elsevier, vol. 32(3), pages 417-458, December.
  11. repec:fth:inadeb:404 is not listed on IDEAS
  12. Lee, Woojin & Roemer, John E, 1998. " Income Distribution, Redistributive Politics, and Economic Growth," Journal of Economic Growth, Springer, Springer, vol. 3(3), pages 217-40, September.
  13. Robert Moffitt & David Ribar & Mark Wilhelm, 1996. "The Decline of Welfare Benefits in the U.S.: The Role of Wage Inequality," NBER Working Papers 5774, National Bureau of Economic Research, Inc.
  14. Ugo Panizza, 1999. "Income Inequality and Economic Growth: Evidence from the American Data," IDB Publications 6877, Inter-American Development Bank.
  15. Zaman, Hassan, 1999. "Assessing the impact of micro-credit on poverty and vulnerability in Bangladesh," Policy Research Working Paper Series 2145, The World Bank.
  16. Perotti, Roberto, 1992. "Income Distribution, Politics, and Growth," American Economic Review, American Economic Association, American Economic Association, vol. 82(2), pages 311-16, May.
  17. Bassett, William F. & Burkett, John P. & Putterman, Louis, 1999. "Income distribution, government transfers, and the problem of unequal influence," European Journal of Political Economy, Elsevier, Elsevier, vol. 15(2), pages 207-228, June.
  18. Hannu Tanninen, 1999. "Income inequality, government expenditures and growth," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 31(9), pages 1109-1117.
  19. Joanna Ledgerwood, 1998. "Microfinance Handbook: An Institutional and Financial Perspective," World Bank Publications, The World Bank, number 12383, August.
  20. Partridge, Mark D, 1997. "Is Inequality Harmful for Growth? Comment," American Economic Review, American Economic Association, American Economic Association, vol. 87(5), pages 1019-32, December.
  21. Panizza, Ugo, 2002. " Income Inequality and Economic Growth: Evidence from American Data," Journal of Economic Growth, Springer, Springer, vol. 7(1), pages 25-41, March.
  22. Gouveia, Miguel & Masia, Neal A, 1998. " Does the Median Voter Model Explain the Size of Government?: Evidence from the States," Public Choice, Springer, Springer, vol. 97(1-2), pages 159-77, October.
  23. Jason Furman & Joseph E. Stiglitz, 1998. "Economic consequences of income inequality," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, Federal Reserve Bank of Kansas City, pages 221-263.
  24. Milanovic, Branko, 1999. "Do more unequal countries redistribute more? does the median voter hypothesis hold?," Policy Research Working Paper Series 2264, The World Bank.
  25. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(5), pages 914-27, October.
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