Fiscal Adjustment and Income Inequality: Sub-National Evidence from Brazil
32 Pages Posted: 20 Apr 2016
Date Written: June 1, 2014
The paper combines state-level fiscal data with household survey data to assess the links between sub-national fiscal policy and income inequality in Brazil over the period 1995-2011. The results indicate that a tighter fiscal stance at the sub-national level is not associated with a deterioration in inequality measures. This finding contrasts with the conclusions of several papers in the burgeoning literature on the effects of fiscal consolidation on inequality using national data for OECD economies. In addition, the authors find that a tighter stance is typically positively associated with a measure of "shared prosperity" . Hence, the results caution against extrapolating policy implications of the literature focusing on advanced economies to other settings.
Keywords: Subnational Economic Development, Debt Markets, Inequality, Economic Theory & Research, Poverty Impact Evaluation
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