Economic Growth And Inequality: The Role Of Fiscal Policies
This paper analyses the impact of different instruments of fiscal policy on economic growth as well as on income inequality, using an unbalanced panel of 43 upper-middle and high income countries for the period 1972-2006. We consider and estimate two individual equations explaining growth and inequality in order to assess the incidence of different fiscal policies. Firstly, our approach considers imposing orthogonal assumptions between growth and inequality in both equations, and secondly, it allows growth to be included in the inequality equation, and inequality to be included in the growth equation. The empirical results suggest that an increase in the size of government measured through current expenditures and direct taxes diminishes economic growth while reducing inequality, being public investment the only fiscal policy that may break this trade-off between efficiency and equity, since increases in this item reduces inequality without harming output. Therefore, the results reflect that the trade-off between efficiency and equity that governments often confront when designing their fiscal policies may be avoided.
(This abstract was borrowed from another version of this item.)
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 50 (2011)
Issue (Month): 2-3 (September)
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=0004-900X|
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0004-900X|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ward Romp & Jakob de Haan, 2007.
"Public Capital and Economic Growth: A Critical Survey,"
Perspektiven der Wirtschaftspolitik,
Verein für Socialpolitik, vol. 8(s1), pages 6-52, April.
- Romp, Ward & de Haan, Jakob, 2005. "Public capital and economic growth: a critical survey," EIB Papers 2/2005, European Investment Bank, Economics Department.
- Galor, Oded & Tsiddon, Daniel, 1997. "Technological Progress, Mobility, and Economic Growth," American Economic Review, American Economic Association, vol. 87(3), pages 363-382, June.
- Galor, Oded & Tsiddon, Daniel, 1996. "Technological Progress, Mobility, and Economic Growth," CEPR Discussion Papers 1413, C.E.P.R. Discussion Papers.
- Galor, O. & Tsiddon, D., 1996. "Technological Progress, Mobility and Economic Growth," Papers 13-96, Tel Aviv.
- Huang, Ho-Chuan (River) & Lin, Yi-Chen & Yeh, Chih-Chuan, 2009. "Joint determinations of inequality and growth," Economics Letters, Elsevier, vol. 103(3), pages 163-166, June.
- Sarah Voitchovsky, 2005. "Does the Profile of Income Inequality Matter for Economic Growth?," Journal of Economic Growth, Springer, vol. 10(3), pages 273-296, September.
- Sarah Voitchovsky, 2003. "Does the Profile of Income Inequality Matter for Economic Growth?," LIS Working papers 354, LIS Cross-National Data Center in Luxembourg.
- Iimi, Atsushi, 2005. "Decentralization and economic growth revisited: an empirical note," Journal of Urban Economics, Elsevier, vol. 57(3), pages 449-461, May.
- Mattias Lundberg & Lyn Squire, 2003. "The simultaneous evolution of growth and inequality," Economic Journal, Royal Economic Society, vol. 113(487), pages 326-344, April.
- Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
- Caroli, Eve & Greenan, Nathalie & Guellec, Dominique, 2001. "Organizational Change and Skill Accumulation," Industrial and Corporate Change, Oxford University Press, vol. 10(2), pages 481-506, June.
- Enikolopov, Ruben & Zhuravskaya, Ekaterina, 2007. "Decentralization and political institutions," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2261-2290, December.
- Enikolopov, Ruben & Zhuravskaya, Ekaterina, 2003. "Decentralization and Political Institutions," CEPR Discussion Papers 3857, C.E.P.R. Discussion Papers.
- Ruben Enikolopov & Ekaterina Zhuravskaya, 2004. "Decentralization and Political Institutions," Economics Working Papers 0045, Institute for Advanced Study, School of Social Science.
- Ruben Enikolopov & Ekaterina Zhuravskaya, 2006. "Decentralization and Political Institutions," Working Papers w0065, Center for Economic and Financial Research (CEFIR).
- Galor, Oded & Zang, Hyoungsoo, 1997. "Fertility, income distribution, and economic growth: Theory and cross-country evidence," Japan and the World Economy, Elsevier, vol. 9(2), pages 197-229, May.
- Oded Galor & Hyoungsoo Zang, 1995. "Fertility, income distribution, and economic growth: Theory and cross-country evidence," Working Papers 95-01, Brown University, Department of Economics.
- Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
- Saint-Paul, Gilles & Verdier, Thierry, 1993. "Education, democracy and growth," Journal of Development Economics, Elsevier, vol. 42(2), pages 399-407, December.
- Partridge, Mark D, 1997. "Is Inequality Harmful for Growth? Comment," American Economic Review, American Economic Association, vol. 87(5), pages 1019-1032, December.
- Christophe Kamps, 2005. "The Dynamic Effects of Public Capital: VAR Evidence for 22 OECD Countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(4), pages 533-558, August.
- Kamps, Christophe, 2004. "The Dynamic Effects of Public Capital: VAR Evidence for 22 OECD Countries," Kiel Working Papers 1224, Kiel Institute for the World Economy (IfW).
- Michael P. Murray, 2006. "Avoiding Invalid Instruments and Coping with Weak Instruments," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 111-132, Fall.
- Xavier Ramos & Oriol Roca-Sagales, 2008. "Long-Term Effects of Fiscal Policy on the Size and Distribution of the Pie in the UK," Fiscal Studies, Institute for Fiscal Studies, vol. 29(3), pages 387-411, September.
- Ales Bulir & Anne Marie Gulde, 1995. "Inflation and Income Distribution; Further Evidenceon Empirical Links," IMF Working Papers 95/86, International Monetary Fund.
- Lin Shu-Chin & Huang Ho-Chuan & Kim Dong-Hyeon & Yeh Chih-Chuan, 2009. "Nonlinearity between Inequality and Growth," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 13(2), pages 1-20, May.
- Folster, Stefan & Henrekson, Magnus, 1999. "Growth and the public sector: a critique of the critics," European Journal of Political Economy, Elsevier, vol. 15(2), pages 337-358, June.
- Fölster, Stefan & Henrekson, Magnus, 1997. "Growth and the Public Sector: A Critique of the Critics," Working Paper Series 492, Research Institute of Industrial Economics, revised 10 Jun 1998.
- Richard Blundell & Stephen Bond & Frank Windmeijer, 2000. "Estimation in dynamic panel data models: improving on the performance of the standard GMM estimator," IFS Working Papers W00/12, Institute for Fiscal Studies.
- repec:dau:papers:123456789/10054 is not listed on IDEAS Full references (including those not matched with items on IDEAS)