Income inequality, tax base and sovereign spreads

Joshua Aizenman and Yothin Jinjarak

Santa Cruz Department of Economics, Working Paper Series from Department of Economics, UC Santa Cruz

Abstract: This note investigates the impact of greater income inequality on the tax base, on the defactofiscal space, and the sovereign spreads. Using data from 50 countries in 2005 and in 2010,we find that higher income inequality is associated with a lower tax base, lower de-facto fiscalspace, and higher sovereign spreads. The economic magnitude of these effects is rather large: aone standard deviation increase of inequality is associated with a lower tax base of 28 % GDP,and with a higher sovereign spread of 240 basis points in 2005

Keywords: Social and Behavioral Sciences; Income inequality; tax-base; fiscal space; sovereign spreads (search for similar items in EconPapers)
Date: 2011-10-12
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: 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 (2012)
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