Does pro-cyclical fiscal policy lead to more income inequality? An empirical analysis for sub-saharan Africa

Rasmane Ouedraogo ()

Economics Bulletin, 2015, vol. 35, issue 2, 1306-1317

Abstract: Despite progress in some cases, many Sub-Saharan Africa (SSA) countries are not currently on track to achieve their Millennium Development Goals, particularly those related to poverty and income inequality. This situation is associated to procyclical fiscal policy highlighted in previous literature. This paper examines whether procyclical fiscal policy leads to more income inequality and therefore employs panel data techniques with heterogeneous slope (Mean Group model) covering 30 Sub-Saharan Africa countries over the period from 1985 to 2012. Our results confirm that, not only pro-cyclical fiscal policy is the norm in SSA economies, but also the effect of pro-cyclical fiscal policy on income inequality depends on the type of expenses: pro-cyclical public investment leads to more income inequality, contrary to pro-cyclical government consumption expenditures.

Keywords: Pro-cyclicality; fiscal policy; income inequality; Sub-Saharan African countries (search for similar items in EconPapers)
JEL-codes: H5 I3 (search for similar items in EconPapers)
Date: 2015-06-01
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Citations: View citations in EconPapers (1)

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