Income Inequality, Tax Base and Sovereign Spreads

Joshua Aizenman and Yothin Jinjarak

FinanzArchiv: Public Finance Analysis, 2012, vol. 68, issue 4, 431-444

Abstract: This paper investigates the association between greater income inequality, de-facto fiscal space, and sovereign spreads. Using data from 50 countries in 2007, in 2009 and in 2011, we find that higher income inequality is associated with a lower tax base, lower de-facto fiscal space, and higher sovereign spreads. The economic magnitude of these effects is rather large: an increase in the Gini coefficient of inequality by 1 (in a scale of 0--100), is associated in 2011 with a lower tax base of 2 percent of the GDP, and with a higher sovereign spread of 45 basis points.

Keywords: Income inequality; tax-base; fiscal space; sovereign spreads (search for similar items in EconPapers)
JEL-codes: D63 F41 H20 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (28)

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Related works:
Working Paper: Income inequality, tax base and sovereign spreads (2012)
Working Paper: Income inequality, tax base and sovereign spreads (2012)
Working Paper: Income inequality, tax base and sovereign spreads (2011)
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DOI: 10.1628/001522108X659565

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