The Effects of Fiscal Redistribution (original) (raw)
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This collection of articles adds greatly to our understanding of the link between economic performance and inequality, combining theory, econometrics, and case studies, and looking at both taxes and expenditures. The questions are investigated in a huge range of circumstances-both developed and developing countries, at the national and subnational levels. The IMF recognizes that its policies can have huge distributive consequences and so this book will be important not only for guiding its own work, but for scholars and policymakers seeking to further enhance our understanding of the determinants of inequality and devising policies that might reduce it.
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In addition to its impact on economic growth and macroeconomic stability, fiscal policy affects the distribution of income across households and individuals through the use of taxes and expenditures. As a result, policy makers and development partners are likely to be interested in the answers to, among others, the following questions: what is the combined impact of taxes and transfers on poverty and inequality?; how progressive or regressive are different fiscal interventions, and what are their contributions to the overall impact?; what is the distributive efficiency of the existing fiscal package?; what is the distributional impact of a particular policy reform?; and what are the characteristics of net payers into and net beneficiaries from the fiscal package? The World Bank has partnered with the Commitment to Equity (CEQ) Institute at Tulane University to answer these questions using the Institute’s comprehensive fiscal incidence diagnostic tool. This tool - the CEQ assessment ...
Research Square (Research Square), 2023
Motivated by the sharp increases in public spending following the global financial crisis and the COVID-19 pandemic, we employ the GMM Panel VAR approach at annual frequency between 2004-2014 to investigate the response of alternative income distribution variables to shocks imposed on tax revenues and three key components of social expenditures: social protection, health and education. We confirm the potential of fiscal policy to reduce income inequality, but point to the differential approaches to do so in middle-and high-income countries. We find that the particular expenditure component under consideration matters in terms of the impact on inequality and on different parts of the income distribution, as well as in terms of the implied time profile. In middle-income countries, positive education spending shocks are the most effective in achieving better distributional outcomes. By contrast, in high-income countries, positive health spending and tax shocks have a more pronounced favourable distributional impact.
Joint determinants of fiscal policy, income inequality and economic growth
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This paper analyses the relationship between income inequality and economic growth through fiscal policy. To this end, we present and estimate two systems of structural equations with error components through which gross income inequality determines different fiscal policy outcomes, which subsequently affects the evolution of economic growth and net income inequality.
IJBMS, 2023
The rising income inequality is a global problem, and reducing income inequality is one of the Sustainable Development Goals of the United Nations. This paper examines the impact of nonsystematic fiscal discretionary spending on income distribution in selected developed and developing countries. The paper's panel is comprised of 64 countries from 1980 to 2021. World Income Inequality Database (WIID) is utilized for income inequality data; moreover, the leftover variables are extracted from World Development Indicators (WDI). This study employed the Generalized Method of Moment (GMM) in a two-step Forward Orthogonal Deviation (FOD) transformation to obtain the results. In aggregate analysis, the study's results confirm the significant role of non-systematic fiscal discretionary spending in income distribution, revealing that income inequality is reduced with non-systematic discretionary public expenditures. In disaggregate analysis, the results of developing countries also found supportive evidence for the impact of non-systematic fiscal discretionary spending on income distribution, and it is concluded that income inequality significantly diminishes with the extension of non-systematic discretionary fiscal spending. In contrast, the developed countries' results indicated that the non-systematic fiscal discretionary spending plays no role in income distribution and found that the income inequality of developed countries isn't affected by discretionary public expenditures.
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SSRN Electronic Journal, 2016
This paper was prepared for the UNU-WIDER 30th Anniversary Conference on 'Mapping the future of development economics', held on 17-19 September 2015 in Helsinki, Finland, as part of the UNU-WIDER project on 'Development policy and practices-competing paradigms and approaches'.