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Income Inequality and Redistributive Government Spending

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  • 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.

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

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