Income Inequality and Redistributive Government Spending

26 Pages Posted: 28 Jan 2006

See all articles by Luiz R. de Mello

Luiz R. de Mello

OECD

Erwin R. Tiongson

Georgetown University - Edmund A. Walsh School of Foreign Service (SFS); Institute for the Study of Labor (IZA); University College London - CReAM - Centre for Research and Analysis of Migration; Asian Institute of Management

Date Written: January 2003

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.

Keywords: Income distribution, government spending, capital deepening

JEL Classification: I30, H53, E60

Suggested Citation

de Mello, Luiz R. and Tiongson, Erwin R., Income Inequality and Redistributive Government Spending (January 2003). IMF Working Paper No. 03/14, Available at SSRN: https://ssrn.com/abstract=879089

Luiz R. De Mello (Contact Author)

OECD ( email )

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Erwin R. Tiongson

Georgetown University - Edmund A. Walsh School of Foreign Service (SFS) ( email )

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Institute for the Study of Labor (IZA) ( email )

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