IDEAS home Printed from https://ideas.repec.org/a/rjr/romjef/vy2023i1p165-184.html

From Fiscal policy to Income inequality in Advanced economies Does Institutional quality matter

Author

Listed:
  • Van Bon NGUYEN

    (Faculty of Finance – Banking, University of Finance Marketing (UFM), Vietnam.)

Abstract

Governments use fiscal policy to correct market failures and reallocate national income, so fiscal policy can narrow income inequality in society. Does institutional quality matter for the fiscal policy – income inequality relationship in advanced economies? For the answer, the paper investigates the impacts of fiscal policy, institutional quality and their interaction on income inequality for a balanced panel dataset of 30 advanced economies from 2002 to 2020. It applies the system-GMM Arellano-Bond estimators for estimation. Then, it uses the PMG estimator to test the robustness. The results show that fiscal policy and institutional quality narrow income inequality, but their interaction widens. It seems counter-intuitive. In addition, economic growth and unemployment increase income inequality. The findings suggest some implications for improving institutional quality and using fiscal policy to reduce income inequality in the advanced economies.

Suggested Citation

  • Van Bon NGUYEN, 2023. "From Fiscal policy to Income inequality in Advanced economies Does Institutional quality matter," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 165-184, March.
    • Handle: RePEc:rjr:romjef:v::y:2023:i:1:p:165-184
    as

    Download full text from publisher

    File URL: https://www.ipe.ro/rjef/rjef1_2023/rjef1_2023p165-184.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422, Enero-Abr.
    2. Chandika Gunasinghe & E. A. Selvanathan & Athula Naranpanawa & John Forster, 2021. "Correction to: Rising Income Inequality in OECD Countries: Does Fiscal Policy Sacrifce Economic Growth in Achieving Equity?," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 33(3), pages 793-793, June.
    3. Ayse Demir & Vanesa Pesqué-Cela & Yener Altunbas & Victor Murinde, 2022. "Fintech, financial inclusion and income inequality: a quantile regression approach," The European Journal of Finance, Taylor & Francis Journals, vol. 28(1), pages 86-107, January.
    4. Joakim Westerlund, 2007. "Testing for Error Correction in Panel Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(6), pages 709-748, December.
    5. Chandika Gunasinghe & E. A. Selvanathan & Athula Naranpanawa & John Forster, 2021. "Rising Income Inequality in OECD Countries: Does Fiscal Policy Sacrifice Economic Growth in Achieving Equity?," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 33(6), pages 1840-1876, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jianu, Ionut & Tudorache, Maria-Daniela, 2025. "The impact of institutions on income inequality in the EU Member States," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 14(4), pages 157-165.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ouedraogo, Benoît & Ouedraogo, Idrissa & Sawadogo, Hamidou, 2025. "Effects of trade openness on income inequality in sub-Saharan Africa: direct effects and transmission channels," International Economics, Elsevier, vol. 184(C).
    2. Murshed, Muntasir & Ahmed, Rizwan & Al-Tal, Raad Mahmoud & Kumpamool, Chamaiporn & Vetchagool, Witchulada & Avarado, Rafael, 2023. "Determinants of financial inclusion in South Asia: The moderating and mediating roles of internal conflict settlement," Research in International Business and Finance, Elsevier, vol. 64(C).
    3. Suleiman O. Mamman & Kazi Sohag & Attahir B. Abubakar, 2023. "Inclusive growth in Africa: Do fiscal measures matter?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(2), pages 2273604-227, October.
    4. Anna Wildowicz-Szumarska, 2022. "Is redistributive policy of EU welfare state effective in tackling income inequality? A panel data analysis," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 17(1), pages 81-101, March.
    5. Leng, Chunyu & Wei, Siao-Yun & Al-Abyadh, Mohammed Hasan Ali & Halteh, Khaled & Bauetdinov, Majit & Le, Luan Thanh & Alzoubi, Haitham M., 2024. "An empirical assessment of the effect of natural resources and financial technologies on sustainable development in resource abundant developing countries: Evidence using MMQR estimation," Resources Policy, Elsevier, vol. 89(C).
    6. Godwin Olasehinde-Williams & Festus Victor Bekun, 2024. "Do Fiscal Policy Outcomes Promote Ethno-Religious Stability in African States?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(4), pages 16013-16037, December.
    7. Herwartz, Helmut & Reimers, Hans-Eggert, 2006. "Modelling the Fisher hypothesis: World wide evidence," Economics Working Papers 2006-04, Christian-Albrechts-University of Kiel, Department of Economics.
    8. Bilal Mehmood & Syed Hassan Raza & Mahwish Rana & Huma Sohaib & Muhammad Azhar Khan, 2014. "Triangular Relationship between Energy Consumption, Price Index and National Income in Asian Countries: A Pooled Mean Group Approach in Presence of Structural Breaks," International Journal of Energy Economics and Policy, Econjournals, vol. 4(4), pages 610-620.
    9. Mohammad Zulfan Tadjoeddin, 2012. "Electoral conflict and the maturity of local democracy in Indonesia: testing the modernisation hypothesis," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 17(3), pages 476-497.
    10. Leopoldo Fergusson & Carlos Molina, 2020. "Facebook Causes Protests," HiCN Working Papers 323, Households in Conflict Network.
    11. Gustavo J. Bobonis & Paul J. Gertler & Marco Gonzalez-Navarro & Simeon Nichter, 2022. "Vulnerability and Clientelism," American Economic Review, American Economic Association, vol. 112(11), pages 3627-3659, November.
    12. Vassilis Monastiriotis & Cigdem Borke Tunali, 2020. "The Sustainability of External Imbalances in the European Periphery," Open Economies Review, Springer, vol. 31(2), pages 273-294, April.
    13. Hyunsoo Kang, 2022. "Impacts of Income Inequality and Economic Growth on CO 2 Emissions: Comparing the Gini Coefficient and the Top Income Share in OECD Countries," Energies, MDPI, vol. 15(19), pages 1-15, September.
    14. Karaman Örsal, Deniz Dilan & Droge, Bernd, 2014. "Panel cointegration testing in the presence of a time trend," Computational Statistics & Data Analysis, Elsevier, vol. 76(C), pages 377-390.
    15. Huy Quang Doan, 2019. "Trade, Institutional Quality and Income: Empirical Evidence for Sub-Saharan Africa," Economies, MDPI, vol. 7(2), pages 1-23, May.
    16. Nicholas M. Odhiambo & Talknice Saungweme, "undated". "Does International Tourism Spur International Trade In Ssa Countries? A Dynamic Panel Data Analysis," Working Papers AESRI07, African Economic and Social Research Institute (AESRI).
    17. Iyigun, Murat, 2006. "Ottoman Conquests and European Ecclesiastical Pluralism," IZA Discussion Papers 1973, IZA Network @ LISER.
    18. Seghezza, Elena & Pittaluga, Giovanni B., 2018. "Resource rents and populism in resource-dependent economies," European Journal of Political Economy, Elsevier, vol. 54(C), pages 83-88.
    19. repec:jaf:journl:v:14:y:2023:i:2:n:529 is not listed on IDEAS
    20. Daron Acemoglu & James A. Robinson, 2013. "Ekonomia kontra polityka: niebezpieczne rady w kwestiach polityki ekonomicznej," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 11-12, pages 113-136.
    21. Lourdes ROJAS RUBIO, 2022. "Inequality, Corruption and Support for Democracy," Thema Working Papers 2022-20, THEMA (Théorie Economique, Modélisation et Applications), CY Cergy-Paris University, ESSEC and CNRS.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rjr:romjef:v::y:2023:i:1:p:165-184. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Corina Saman The email address of this maintainer does not seem to be valid anymore. Please ask Corina Saman to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/ipacaro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.