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Ideology and redistribution through public spending

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  • Herwartz, Helmut
  • Theilen, Bernd

Abstract

For a panel of OECD economies (1980–2013) we analyse the scope of government ideology to shape patterns of public expenditures. To address if public expenditures are used to channel redistributive outcomes, we adopt a flexible panel error correction model and proceed in two steps: Firstly, we analyse if ideological positions matter for the sizing of the public sector. Secondly, we address the actual impact of government ideology on two disjoint categories of public expenditure that are characterized by distinguished redistributive effects. Under both, left-wing and right-wing governments, public spending shows progressively redistributive effects which are indirectly channelled through their policy response to changing macroeconomic, fiscal and demographic fundamentals. While right-wing governments act progressively redistributive under favourable socio-economic conditions, their left-wing counterparts do so under unfavourable conditions. Comparing the two effects in terms of their explanatory content, we find that the latter is stronger than the former.

Suggested Citation

  • Herwartz, Helmut & Theilen, Bernd, 2017. "Ideology and redistribution through public spending," European Journal of Political Economy, Elsevier, vol. 46(C), pages 74-90.
    • Handle: RePEc:eee:poleco:v:46:y:2017:i:c:p:74-90
    DOI: 10.1016/j.ejpoleco.2016.11.002
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    5. Potrafke, Niklas, 2020. "General or central government? Empirical evidence on political cycles in budget composition using new data for OECD countries," European Journal of Political Economy, Elsevier, vol. 63(C).
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    7. Florian Haelg & Niklas Potrafke & Jan-Egbert Sturm, 2022. "The determinants of social expenditures in OECD countries," Public Choice, Springer, vol. 193(3), pages 233-261, December.
    8. Helmut Herwartz & Bernd Theilen, 2021. "Government ideology and fiscal consolidation: Where and when do government parties adjust public spending?," Public Choice, Springer, vol. 187(3), pages 375-401, June.
    9. Sayantan Ghosh Dastidar & Nicholas Apergis, 2022. "Holidays and economic growth: Evidence from a panel of Indian states," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 30(1), pages 33-50, January.
    10. Lind, Jo Thori, 2020. "Rainy day politics. An instrumental variables approach to the effect of parties on political outcomes," European Journal of Political Economy, Elsevier, vol. 61(C).
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    13. Ludger Schuknecht & Holger Zemanek, 2018. "Social Dominance," Working Papers REM 2018/30, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    14. Ludger Schuknecht & Holger Zemanek, 2021. "Public expenditures and the risk of social dominance," Public Choice, Springer, vol. 188(1), pages 95-120, July.
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    16. Jianchun Fang & Giray Gozgor & Cheng Yan, 2021. "Does globalisation alleviate polarisation?," The World Economy, Wiley Blackwell, vol. 44(4), pages 1031-1052, April.
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    19. Choi, Gwangeun, 2019. "Revisiting the redistribution hypothesis with perceived inequality and redistributive preferences," European Journal of Political Economy, Elsevier, vol. 58(C), pages 220-244.

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    More about this item

    Keywords

    Redistribution; Public expenditure; Government ideology; Electoral cycles; OECD panel data;
    All these keywords.

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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