Growing (un)equal: fiscal policy and income inequality in China and BRIC+

Serhan Cevik and Carolina Correa-Caro

Journal of the Asia Pacific Economy, 2020, vol. 25, issue 4, 634-653

Abstract: This article investigates the empirical characteristics of income inequality in China and other large emerging market economies over the period 1980–2013, with a focus on the redistributive contribution of fiscal policy. Using instrumental variable techniques to deal with potential endogeneity, we find evidence supporting the hypothesis of the existence of a Kuznets curve – an inverted U-shaped relationship between income inequality and economic development – in China and the panel of BRIC + countries. In the case of China, the empirical results indicate that government spending and taxation have opposing effects on income inequality. While government spending appears to have a worsening impact, taxation improves income distribution. Even though the redistributive effect of fiscal policy in China appears to be stronger than what we identify in the BRIC + panel, it is not large enough to compensate for the adverse impact of other influential factors.

Date: 2020
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Citations: View citations in EconPapers (9)

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Working Paper: Growing (Un)equal: Fiscal Policy and Income Inequality in China and BRIC+ (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:taf:rjapxx:v:25:y:2020:i:4:p:634-653

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DOI: 10.1080/13547860.2019.1699985

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