The Effects of Fiscal Redistribution

Michele Battisti and Joseph Zeira

Chapter 7 in Inequality and Growth: Patterns and Policy, 2016, pp 201-224 from Palgrave Macmillan

Abstract: Abstract Every discussion on income distribution and inequality distinguishes between market income, namely income before tax and without transfers, and disposable, or net income, which is after tax and including transfers. Hence, taxation and transfers create a redistribution of income. This redistribution is usually progressive, as direct taxes and subsidies are progressive, and thus it is supposed to reduce inequality, in the transition from market income to disposable income. This paper focuses on measuring the effect of fiscal policy in income redistribution and in reducing inequality. It also examines which type of fiscal policy is most strongly related to the redistribution of income, are they transfer payments? Is it direct taxation? Or is it the overall measure of fiscal policy, namely public expenditures, which are also known as the size of the public sector?

Keywords: International Monetary Fund; Fiscal Policy; Public Expenditure; Gini Coefficient; Disposable Income (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:pal:intecp:978-1-137-55454-3_7

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DOI: 10.1057/9781137554543_7

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