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Top Income Shares and Budget Deficits

Santo Milasi ()

Rivista di Politica Economica, 2014, issue 1, 383-406

Abstract: The paper argues that the concentration of income at the top of the distribution, along with a decreasing taxation imposed on high incomes, may have affected OECD countries’ fiscal performances in recent decades. Using a panel of 17 OECD countries between 1975 and 2005, the paper presents the first reported evidence of a positive relationship between the top 1 percent income share and budget deficits. The disaggregated analysis of the budget components suggests that such result is due to a negative relationship between the concentration of income at the top and budget revenues.

Keywords: budget deficits; budget revenues; income inequality; top income shares; top marginal tax rate. (search for similar items in EconPapers)
JEL-codes: D31 E62 H20 H62 (search for similar items in EconPapers)
Date: 2014
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Handle: RePEc:rpo:ripoec:y:2014:i:1:p:383-406