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On the side effects of fiscal policy: Fiscal rules and income inequality

Author

Listed:
  • Jean-Louis Combes

    (LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne)

  • Xavier Debrun

    (Banque nationale de Belgique)

  • Alexandru Minea

    (LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne, Carleton University)

  • Pegdéwendé Nestor Sawadogo

    (International Monetary Fund (IMF))

  • Cezara Vinturis

    (UVT - Universitatea de Vest din Timișoara [România] = West University of Timișoara [Romania] = Université Ouest de Timișoara [Roumanie], ICUB - Research Institute of the University of Bucharest - UniBuc - University of Bucharest)

Abstract

Contributing to an important literature on the side effects of fiscal policy, this paper employs a treatment effect analysis to show that fiscal rules (FR) have significant side effects on income inequality (IQ). Economically meaningful, this favorable causal direct effect is robust to many alternative specifications. Nevertheless, not all FR are alike: balanced budget and debt rules decrease IQ, contrary to expenditure rules that increase it. Finally, the effect of FR on IQ is found to be subject to heterogeneity related to various factors. Given the current upward global IQ trends, our results provide insightful evidence for governments of countries aiming at reducing IQ.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Jean-Louis Combes & Xavier Debrun & Alexandru Minea & Pegdéwendé Nestor Sawadogo & Cezara Vinturis, 2024. "On the side effects of fiscal policy: Fiscal rules and income inequality," Post-Print hal-04797645, HAL.
    • Handle: RePEc:hal:journl:hal-04797645
    DOI: 10.1016/j.ejpoleco.2024.102534
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    Cited by:

    1. Antonia Lopez Villavicencio & Hugo Oriola, 2025. "National elections and sub-national electoral cycles: Do strong fiscal rules matter in Europe?," Working Papers hal-05002552, HAL.
    2. Deniz, Pinar & Stengos, Thanasis, 2025. "Heterogeneity of institutions and model uncertainty in the income inequality nexus," European Journal of Political Economy, Elsevier, vol. 87(C).
    3. Coulibaly, Yacouba, 2025. "The effects of resource-backed loans on deforestation: Evidence from developing countries," World Development, Elsevier, vol. 188(C).
    4. Dobre Elena-Gabriela & Teodorescu Dana & Ioanas Corina, 2025. "Business Performability in the Sustainable Development Imperative. Factorial Analysis on the Performance of Asset Utilizations," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 19(1), pages 2587-2600.
    5. Coulibaly, Yacouba, 2024. "Resource-backed loans and ecological efficiency of human development: Evidence from African countries," Ecological Economics, Elsevier, vol. 224(C).

    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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