Joint determinants of fiscal policy, income inequality and economic growth

Leonel Muinelo-Gallo and Oriol Roca-Sagalés

No 12-04, Documentos de Trabajo (working papers) from Instituto de Economía - IECON

Abstract: 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 equiation 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. The empirical results, obtained using an unbalanced panel data of 21 high-income OCDE countries during the period 1972-2006, suggest that gross income inequality is a significant determinant of fiscal policy outcomes. Additionally, the results show that distributive expenditures and direct taxes produce significant reductions in GDP growth and net income inequality reflecting the standard efficiency-equity trade-off associated to certain fiscal policy measures.

Keywords: Economic growth; Inequality; Fiscal policy; Panel data (search for similar items in EconPapers)
JEL-codes: C23 C33 D30 E62 O40 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2012-03
New Economics Papers: this item is included in nep-pbe
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https://hdl.handle.net/20.500.12008/4220 (application/pdf)

Related works:
Journal Article: Joint determinants of fiscal policy, income inequality and economic growth (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ulr:wpaper:dt-04-12

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