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Inequality, Political Systems and Public Spending

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  • Enrico Longoni

    ()

  • Filippo Gregorini

Abstract

Political regimes and institutions di®er across countries. Such char- acteristics in°uence public spending within each country. The aim of this paper is to check for the existence of a link between political institu- tions, income inequality and public spending. We develop an empirical investigation, based on panel data analysis, on the determinants of pub- lic spending focusing on political, economic, demographic and social variables in large sample of developed and developing countries from 1970 to 2005. In particular, we focus on the e®ects of electoral rules on government consumption ¯nding that in countries with proportional electoral rule an increase in the heterogeneity of the government in- creases government consumption, while in countries with majoriratian electoral rule, a shift from presidential to parliamentary system leads to an increase in government consumption. We ¯nd that the link between income distribution, measured by the Gini index, and public spending depends upon institutional characteristics. Moreover, we ¯nd empiri- cal support for the argument that government spending is a policy tool used by governments to insurance the domestic economy from external shocks stemming from international trade.

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File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper159.pdf
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Bibliographic Info

Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 159.

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Length: 34 pages
Date of creation: Apr 2009
Date of revision: Apr 2009
Handle: RePEc:mib:wpaper:159

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  1. Hausman, Jerry A., 1983. "Specification and estimation of simultaneous equation models," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 1, chapter 7, pages 391-448 Elsevier.
  2. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
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  4. Alesina, Alberto & Baqir, Reza & Easterly, William, 1999. "Public goods and ethnic divisions," Policy Research Working Paper Series 2108, The World Bank.
  5. Gian Maria Milesi-Ferretti & Roberto Perotti & Massimo Rostagno, 2002. "Electoral Systems And Public Spending," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 609-657, May.
  6. Andrei Shleifer & Robert W. Vishny, 1998. "The Quality of Government," Harvard Institute of Economic Research Working Papers 1847, Harvard - Institute of Economic Research.
  7. Milanovic, Branko, 1999. "Do more unequal countries redistribute more? does the median voter hypothesis hold?," Policy Research Working Paper Series 2264, The World Bank.
  8. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
  9. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
  10. Alessro Lizzeri & Nicola Persico, . "The Provision of Public Goods Under Alternative Electoral Incentives," Penn CARESS Working Papers b96440ba0bfa06ca550ac40aa, Penn Economics Department.
  11. Lindert, Peter H., 1996. "What Limits Social Spending?," Explorations in Economic History, Elsevier, vol. 33(1), pages 1-34, January.
  12. Rodrik, Dani, 1996. "Why do More Open Economies Have Bigger Governments?," CEPR Discussion Papers 1388, C.E.P.R. Discussion Papers.
  13. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
  14. Beck, Thorsten & Clarke, George & Groff, Alberto & Keefer, Philip & Walsh, Patrick, 2000. "New tools and new tests in comparative political economy - the database of political institutions," Policy Research Working Paper Series 2283, The World Bank.
  15. Filippo Gregorini, 2009. "Political Geography and Income Inequalities," Working Papers 152, University of Milano-Bicocca, Department of Economics, revised Feb 2009.
  16. Filippo Gregorini, 2007. "Political Geography and Income Inequalities," DISCE - Quaderni dell'Istituto di Teoria Economica e Metodi Quantitativi itemq0746, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
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Cited by:
  1. Chang, Chun Ping & Berdiev, Aziz N., 2011. "The political economy of energy regulation in OECD countries," Energy Economics, Elsevier, vol. 33(5), pages 816-825, September.
  2. Joan Esteban & Laura Mayoral, 2013. "A Politico-Economic Model of Public Expenditure and Income Taxation," Working Papers 743, Barcelona Graduate School of Economics.

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