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Public Sector Impact on Income Inequality in CEE Countries

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  • Kristina Stefanova

Abstract

The paper focuses on examining the impact of the public sector, specifically the tax system and expenditure structure, on income inequality in CEE countries from 1998 to 2021. A panel data estimation technique is used to analyse this relationship. The findings of the research indicate that the tax systems in the CEE countries, characterised by limited progressivity and low shares of income taxes in total tax revenues, do not contribute effectively to reducing income inequality (shares of personal income tax, direct taxes and VAT are positively connected with GINI). In contrast, social and education spending are negatively associated with income inequality. These results suggest that expenditure policies have a stronger impact than tax measures in addressing income inequality in CEE countries.

Suggested Citation

  • Kristina Stefanova, 2024. "Public Sector Impact on Income Inequality in CEE Countries," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 78-97.
    • Handle: RePEc:bas:econst:y:2024:i:3:p:78-97
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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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