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Government Intervention, Institutional Quality, and Income Inequality: Evidence from Asia and the Pacific, 1988–2014

Author

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  • Bertrand Blancheton

    (University of Bordeaux, France)

  • Dina Chhorn

    (University of Bordeaux, France and University of Lausanne, Switzerland)

Abstract

We examine the linear and nonlinear long-run relationship between public expenditure and institutional quality, and income inequality in Asia and the Pacific. By applying panel cointegration methods using a dataset from 1988 to 2014, our main findings suggest that public expenditure and institutional quality have negative long-run, steady-state effects on income inequality in Asia and the Pacific. The effect of institutional quality has only a one-way Granger causality link to income inequality. The existence of a nonlinear relationship between public expenditure and institutional factors linked to income inequality is also found. It implies that, at the early stage of institutional development, a country whose economy has experienced higher public expenditure generates rising income inequality; then, in the long run, when the country improves its institutional quality, higher public expenditure results in lower income inequality.

Suggested Citation

  • Bertrand Blancheton & Dina Chhorn, 2021. "Government Intervention, Institutional Quality, and Income Inequality: Evidence from Asia and the Pacific, 1988–2014," Asian Development Review, MIT Press, vol. 38(1), pages 176-206, March.
    • Handle: RePEc:tpr:adbadr:v:38:y:2021:i:1:p:176-206
    DOI: 10.1162/adev_a_00162
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    Cited by:

    1. Cristian Barra & Anna Papaccio & Nazzareno Ruggiero, 2023. "Government effectiveness and inequality in Italian regions," Economic Change and Restructuring, Springer, vol. 56(2), pages 781-801, April.
    2. Nguyen Van Bon, 2022. "Does Digitalization Widen Income Inequality? A Comparative Assessment for Advanced and Developing Economies," South East European Journal of Economics and Business, Sciendo, vol. 17(2), pages 154-171, December.
    3. Koh, Sharon G. M. & Lee, Grace H. Y. & Siah, Audrey K. L., 2022. "The Resurgence of Income Inequality in Asia-Pacific: The Role of Trade Openness, Educational Attainment and Institutional Quality," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 56(3), pages 11-27.

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