IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2003-014.html
   My bibliography  Save this paper

Income Inequality and Redistributive Government Spending

Author

Listed:
  • International Monetary Fund

Abstract

The paper examines empirically the question of whether more unequal societies spend more on income redistribution than their more egalitarian counterparts. Theoretical arguments on this issue are inconclusive. The political economy literature suggests that redistributive spending is higher in unequal societies due to median voter preferences. Alternatively, it can be argued that unequal societies may spend less on redistribution because of capital market imperfections. Based on different data sources, the cross-country evidence reported in this paper suggests that more unequal societies do spend less on redistribution.

Suggested Citation

  • International Monetary Fund, 2003. "Income Inequality and Redistributive Government Spending," IMF Working Papers 2003/014, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2003/014
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=16261
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Panizza, Ugo, 2002. "Income Inequality and Economic Growth: Evidence from American Data," Journal of Economic Growth, Springer, vol. 7(1), pages 25-41, March.
    2. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
    3. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," The World Bank Economic Review, World Bank, vol. 10(3), pages 565-591, September.
    4. Moffitt, Robert & Ribar, David & Wilhelm, Mark, 1998. "The decline of welfare benefits in the U.S.: the role of wage inequality," Journal of Public Economics, Elsevier, vol. 68(3), pages 421-452, June.
    5. Milanovic, Branko, 1999. "Do more unequal countries redistribute more? does the median voter hypothesis hold?," Policy Research Working Paper Series 2264, The World Bank.
    6. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 465-490.
    7. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December.
    8. Roland Bénabou, 1996. "Inequality and Growth," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 11-92, National Bureau of Economic Research, Inc.
    9. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(1), pages 35-52.
    10. Partridge, Mark D, 1997. "Is Inequality Harmful for Growth? Comment," American Economic Review, American Economic Association, vol. 87(5), pages 1019-1032, December.
    11. Bourguignon, Francois & Morrisson, Christian, 1998. "Inequality and development: the role of dualism," Journal of Development Economics, Elsevier, vol. 57(2), pages 233-257.
    12. Lindert, Peter H., 1996. "What Limits Social Spending?," Explorations in Economic History, Elsevier, vol. 33(1), pages 1-34, January.
    13. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
    14. Perotti, Roberto, 1992. "Income Distribution, Politics, and Growth," American Economic Review, American Economic Association, vol. 82(2), pages 311-316, May.
    15. Gouveia, Miguel & Masia, Neal A, 1998. "Does the Median Voter Model Explain the Size of Government?: Evidence from the States," Public Choice, Springer, vol. 97(1-2), pages 159-177, October.
    16. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
    17. Joanna Ledgerwood, 1998. "Microfinance Handbook: An Institutional and Financial Perspective," World Bank Publications - Books, The World Bank Group, number 12383.
    18. Figini, P, 1999. "Inequality and Growth Revisited," Trinity Economics Papers 992, Trinity College Dublin, Department of Economics.
    19. Zaman, Hassan, 1999. "Assessing the impact of micro-credit on poverty and vulnerability in Bangladesh," Policy Research Working Paper Series 2145, The World Bank.
    20. Hannu Tanninen, 1999. "Income inequality, government expenditures and growth," Applied Economics, Taylor & Francis Journals, vol. 31(9), pages 1109-1117.
    21. repec:idb:wpaper:404 is not listed on IDEAS
    22. Jason Furman & Joseph E. Stiglitz, 1998. "Economic consequences of income inequality," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 221-263.
    23. Gordon Tullock, 1983. "Further tests of a rational theory of the size of government," Public Choice, Springer, vol. 41(3), pages 419-421, January.
    24. Lee, Woojin & Roemer, John E, 1998. "Income Distribution, Redistributive Politics, and Economic Growth," Journal of Economic Growth, Springer, vol. 3(3), pages 217-240, September.
    25. F. C. Rodrigìuez, 1999. "Does Distributional Skewness Lead to Redistribution? Evidence from the United States," Economics and Politics, Wiley Blackwell, vol. 11(2), pages 171-199, July.
    26. Bassett, William F. & Burkett, John P. & Putterman, Louis, 1999. "Income distribution, government transfers, and the problem of unequal influence," European Journal of Political Economy, Elsevier, vol. 15(2), pages 207-228, June.
    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. Alston, Lee J. & Melo, Marcus Andre & Mueller, Bernardo & Pereira, Carlos, 2013. "Changing social contracts: Beliefs and dissipative inclusion in Brazil," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 48-65.
    2. Mario Holzner, 2010. "Inequality, Growth and Public Spending in Central, East and Southeast Europe," wiiw Working Papers 71, The Vienna Institute for International Economic Studies, wiiw.
    3. Gilles Le Garrec, 2007. "Moral sentiments, democracy and redistributive politics: between nature and culture," 2007 Meeting Papers 702, Society for Economic Dynamics.
    4. Benabou, Roland, 2005. "Inequality, Technology and the Social Contract," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 25, pages 1595-1638, Elsevier.
    5. Gilles Le Garrec, 2011. "Redistribution and the cultural transmission of the taste for fairness," Documents de Travail de l'OFCE 2011-24, Observatoire Francais des Conjonctures Economiques (OFCE).
    6. Nancy Birdsall, 2008. "Income Distribution: Effects on Growth and Development," Chapters, in: Amitava Krishna Dutt & Jaime Ros (ed.), International Handbook of Development Economics, Volumes 1 & 2, volume 0, chapter 48, Edward Elgar Publishing.
    7. Laura Mayoral & Joan Esteban, 2019. "A politico-economic model of public expenditure and income taxation," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 10(3), pages 479-507, November.
    8. Pellicer, Miquel, 2009. "Inequality persistence through vertical vs. horizontal coalitions," Journal of Development Economics, Elsevier, vol. 90(2), pages 258-266, November.
    9. Santo Milasi, 2014. "Top Income Shares and Budget Deficits," Rivista di Politica Economica, SIPI Spa, issue 1, pages 383-406, January-M.
    10. Iana Paliova & Robert McNown & Grant Nülle, 2019. "Multiple Dimensions of Human Development Index and Public Social Spending for Sustainable Development," IMF Working Papers 2019/204, International Monetary Fund.
    11. Fabio Padovano & Francesco Scervini & Gilberto Turati, 2021. "Comparing governments’ efficiency at supplying income redistribution," Constitutional Political Economy, Springer, vol. 32(1), pages 68-97, March.
    12. Ghosal, Sayantan & Proto, Eugenio, 2009. "Democracy, collective action and intra-elite conflict," Journal of Public Economics, Elsevier, vol. 93(9-10), pages 1078-1089, October.
    13. Gilles Le Garrec, 2007. "Pourquoi l'Europe redistribue-t-elle plus que les Etats-Unis ? Au delà du médian égoïste," Working Papers hal-00973048, HAL.
    14. Fabio Padovano & Francesco Scervini & Gilberto Turati, 2016. "How do Governments Fare about Redistribution? New Evidence on the Political Economy of Redistribution," CESifo Working Paper Series 6137, CESifo.
    15. Joan Esteban & Laurence Kranich, 2003. "The Social Contracts with Endogenous Sentiments," Working Papers 71, Barcelona School of Economics.
    16. Matteo Cervellati & Joan Esteban & Laurence Kranich, 2010. "Work Values, Endogenous Sentiments and Redistribution," UFAE and IAE Working Papers 815.10, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    17. Gilles le Garrec, 2009. "Feeling guilty and redistributive politics," Documents de Travail de l'OFCE 2009-22, Observatoire Francais des Conjonctures Economiques (OFCE).
    18. Donath, Liliana & Milos, Marius, 2008. "The role and the performance of public sector in the European Union," MPRA Paper 12568, University Library of Munich, Germany.
    19. Jorge Martínez-Vázquez & Violeta Vulovic & Blanca Moreno Dodson, 2012. "The Impact of Tax and Expenditure Policies on Income Distribution: Evidence from a Large Panel of Countries," Hacienda Pública Española / Review of Public Economics, IEF, vol. 200(1), pages 95-130, March.
    20. Miquel Pellicer & Vimal Ranchhod & Mare Sarr & Eva Wegner, 2011. "Inequality Traps in South Africa: An overview and research agenda," SALDRU Working Papers 57, Southern Africa Labour and Development Research Unit, University of Cape Town.
    21. Fabio Padovano & Gilberto Turati, 2012. "Redistribution through a "Leaky Bucket". What explains the Leakages?," Economics Working Paper from Condorcet Center for political Economy at CREM-CNRS 2012-03-ccr, Condorcet Center for political Economy.
    22. Donath Liliana & Milos Marius, 2008. "The prerequisites of public sector performance: governance and effectiveness," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 3(1), pages 222-227, May.
    23. Hyun Park, 2010. "Fiscal Policy and Equitable Growth," Review of Development Economics, Wiley Blackwell, vol. 14(1), pages 121-140, February.

    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. Luiz de Mello & Erwin R. Tiongson, 2006. "Income Inequality and Redistributive Government Spending," Public Finance Review, , vol. 34(3), pages 282-305, May.
    2. Aysan, Ahmet Faruk, 2005. "The Role of Efficiency of Redistributive Institutions on Redistribution: An Empirical Assessment," MPRA Paper 17773, University Library of Munich, Germany.
    3. Panizza, Ugo, 2002. "Income Inequality and Economic Growth: Evidence from American Data," Journal of Economic Growth, Springer, vol. 7(1), pages 25-41, March.
    4. Mark Gradstein & Branko Milanovic, 2004. "Does Libertè = Egalité? A Survey of the Empirical Links between Democracy and Inequality with Some Evidence on the Transition Economies," Journal of Economic Surveys, Wiley Blackwell, vol. 18(4), pages 515-537, September.
    5. Ugo Panizza, 1999. "Desigualdad del ingreso y crecimiento económico: elementos de juicio de datos de USA," Research Department Publications 4179, Inter-American Development Bank, Research Department.
    6. Lee, Woojin, 2003. "Is democracy more expropriative than dictatorship? Tocquevillian wisdom revisited," Journal of Development Economics, Elsevier, vol. 71(1), pages 155-198, June.
    7. Enea Baselgia & Reto Foellmi, 2022. "Inequality and growth: a review on a great open debate in economics," WIDER Working Paper Series wp-2022-5, World Institute for Development Economic Research (UNU-WIDER).
    8. Adalgiso Amendola & Roberto Dell�Anno, 2014. "Income inequality and economic growth: an empirical investigation in Mediterranean countries," RIEDS - Rivista Italiana di Economia, Demografia e Statistica - The Italian Journal of Economic, Demographic and Statistical Studies, SIEDS Societa' Italiana di Economia Demografia e Statistica, vol. 68(2), pages 35-58, April-Jun.
    9. Mehmet Balcilar & Rangan Gupta & Wei Ma & Philton Makena, 2021. "Income inequality and economic growth: A re‐examination of theory and evidence," Review of Development Economics, Wiley Blackwell, vol. 25(2), pages 737-757, May.
    10. Ademola Obafemi Young, 2019. "Growth Impacts of Income Inequality: Empirical Evidence From Nigeria," Research in World Economy, Research in World Economy, Sciedu Press, vol. 10(3), pages 226-262, December.
    11. Charles-Coll, Jorge A., 2010. "The optimal rate of inequality: A framework for the relationship between income inequality and economic growth," MPRA Paper 28921, University Library of Munich, Germany.
    12. Vollrath, Dietrich, 2008. "Wealth Distribution and the Provision of Public Goods: Evidence from the United States," MPRA Paper 11534, University Library of Munich, Germany.
    13. Lubimov, I.L. (Любимов, И.Л.), 2016. "Inequality and Growth: Theoretical Aspects of Dependence [Неравенство И Экономический Рост: Теоретические Аспекты Зависимости]," Working Papers 2042, Russian Presidential Academy of National Economy and Public Administration.
    14. Marrero, Gustavo A. & Rodríguez, Juan G., 2013. "Inequality of opportunity and growth," Journal of Development Economics, Elsevier, vol. 104(C), pages 107-122.
    15. Marta Simões & João Andrade & Adelaide Duarte, 2013. "A regional perspective on inequality and growth in Portugal using panel cointegration analysis," International Economics and Economic Policy, Springer, vol. 10(3), pages 427-451, September.
    16. Martin Baur, 2010. "Politics and Income Distribution," Chapters, in: Neri Salvadori (ed.), Institutional and Social Dynamics of Growth and Distribution, chapter 3, Edward Elgar Publishing.
    17. Aysan, Ahmet Faruk, 2005. "The Shadowing Role of Redistributive Institutions in the Relationship Between Income Inequality and Redistribution," MPRA Paper 17772, University Library of Munich, Germany.
    18. Roberto Dell'Anno & Adalgiso Amendola, 2015. "Social Exclusion and Economic Growth: An Empirical Investigation in European Economies," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(2), pages 274-301, June.
    19. Thomas Leoni & Wolfgang Pollan, 2003. "The Impact of Inequality on Economic Growth," WIFO Working Papers 211, WIFO.
    20. T. Tavor & L. D. Gonen & M. Weber & U. Spiegel, 2018. "The Effects of Income Levels and Income Inequalities on Happiness," Journal of Happiness Studies, Springer, vol. 19(7), pages 2115-2137, October.

    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:imf:imfwpa:2003/014. 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: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.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.