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Weak Redistribution Dampens Economic Growth and Causes Strong Social Tensions

Author

Listed:
  • Florin GEORGESCU

    (Bucharest University of Economic Studies)

  • Ana-Maria CAZACU
  • Alexandra-Mariana COJOCARU

    (Bucharest University of Economic Studies)

Abstract

The paper aims to assess the intensity and efficiency of using the redistribution function of public finance in Romania as compared to other countries in Europe. The analysis underscores that the major redistribution levers, i.e. tax revenues, social transfers and subsidies, as well as public expenditures in healthcare and education sectors are undersized as compared to the Romanian citizens’ needs. By assuming the setting-up and functioning of the minimal state, with limited tasks in the economy and society, Romania is characterised by one of the highest levels of the citizens’ income inequality, and this grim economic and social landscape proves the weak efficiency of the redistribution function. Hence, by taking an unbiased approach, the fiscal system needs to undergo a substantial revision by including into the taxation base all the resources in the society, without affecting the corporate sector, and placing the emphasis on the progressive taxation of personal income and wealth.

Suggested Citation

  • Florin GEORGESCU & Ana-Maria CAZACU & Alexandra-Mariana COJOCARU, 2020. "Weak Redistribution Dampens Economic Growth and Causes Strong Social Tensions," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 154-169, December.
    • Handle: RePEc:rjr:romjef:v::y:2020:i:4:p:154-169
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    References listed on IDEAS

    as
    1. Pierre Kohler, 2015. "Redistributive Policies for Sustainable Development: Looking at the Role of Assets and Equity," Working Papers 139, United Nations, Department of Economics and Social Affairs.
    2. Orsetta Causa & Mikkel Hermansen, 2020. "Income Redistribution through Taxes and Transfers across OECD Countries," Research on Economic Inequality, in: Inequality, Redistribution and Mobility, volume 28, pages 29-74, Emerald Group Publishing Limited.
    3. Peter Lindert, 2004. "Social Spending and Economic Growth," Challenge, Taylor & Francis Journals, vol. 47(4), pages 6-16.
    4. Pierre Kohler, 2015. "Redistributive Policies for Sustainable Development: Looking at the Role of Assets and Equity," Working Papers id:6431, eSocialSciences.
    5. Mr. Jonathan David Ostry & Mr. Andrew Berg & Mr. Charalambos G Tsangarides, 2014. "Redistribution, Inequality, and Growth," IMF Staff Discussion Notes 2014/002, International Monetary Fund.
    6. Orsetta Causa & Mikkel Hermansen, 2018. "Income Redistribution Through Taxes and Transfers across OECD Countries," LIS Working papers 729, LIS Cross-National Data Center in Luxembourg.
    7. Jonathan David Ostry & Andrew Berg & Charalambos G Tsangarides, 2014. "Redistribution, Inequality, and Growth," IMF Staff Discussion Notes 14/02, International Monetary Fund.
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    More about this item

    Keywords

    redistribution function of public finance; tax revenues; social transfers; social and economic inequality; progressive taxation of personal income and wealth;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

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