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Empirical Determinants of In-kind Redistribution: Partisan Biases and the Role of Inflation

  • Zohal Hessami

    ()

    (Department of Economics, University of Konstanz, Germany)

  • Silke Uebelmesser

    ()

    (Department of Economics, University of Jena, Germany)

This paper investigates how government ideology and inflation affect the government’s choice between cash transfers and in-kind transfers. Our hypotheses are based on three observations: (i) in-kind transfers create stigma, (ii) but make recipients less vulnerable to inflation; (iii) poor benefit recipients make up the core constituency of left-wing parties. Using dynamic panel data estimations for 32 OECD countries over the time period from 1980 to 2007, we provide evidence that the in-kind share of social benefits is lower under left-wing governments. This partisan bias is weakened when left-wing governments respond to inflation by increasing the share of in-kind transfers.

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Paper provided by Department of Economics, University of Konstanz in its series Working Paper Series of the Department of Economics, University of Konstanz with number 2012-20.

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Length: 9 pages
Date of creation: 16 Nov 2012
Date of revision:
Handle: RePEc:knz:dpteco:1220
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  1. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  2. Janet Currie & Firouz Gahvari, 2007. "Transfers in Cash and In Kind: Theory Meets the Data," NBER Working Papers 13557, National Bureau of Economic Research, Inc.
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  8. Beck, Thorsten & Clarke, George & Groff, Alberto & Keefer, Philip & Walsh, Patrick, 2000. "New tools and new tests in comparative political economy - the database of political institutions," Policy Research Working Paper Series 2283, The World Bank.
  9. Baskaran, Thushyanthan, 2011. "Revenue decentralization and inflation: a re-evaluation," MPRA Paper 36911, University Library of Munich, Germany.
  10. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December.
  11. David Roodman, 2007. "A Note on the Theme of Too Many Instruments," Working Papers 125, Center for Global Development.
  12. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
  13. Bearse, P. & Glomm, G. & Janeba, E., 2000. "Why poor countries rely mostly on redistribution in-kind," Journal of Public Economics, Elsevier, vol. 75(3), pages 463-481, March.
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  15. Al-Marhubi, Fahim, 1997. "A note on the link between income inequality and inflation," Economics Letters, Elsevier, vol. 55(3), pages 317-319, September.
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  17. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
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