Government Intervention, Institutional Quality, and Income Inequality: Evidence from Asia and the Pacific, 1988–2014

Bertrand Blancheton and Dina Chhorn
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Bertrand Blancheton: GREThA - Groupe de Recherche en Economie Théorique et Appliquée - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique

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Abstract: We examine the linear and nonlinear long-run relationship between public expenditure and institutional quality, and income inequality in Asia and the Pacific. By applying panel cointegration methods using a dataset from 1988 to 2014, our main findings suggest that public expenditure and institutional quality have negative long-run, steady-state effects on income inequality in Asia and the Pacific. The effect of institutional quality has only a one-way Granger causality link to income inequality. The existence of a nonlinear relationship between public expenditure and institutional factors linked to income inequality is also found. It implies that, at the early stage of institutional development, a country whose economy has experienced higher public expenditure generates rising income inequality; then, in the long run, when the country improves its institutional quality, higher public expenditure results in lower income inequality.

Keywords: Asia and the Pacific; income inequality; institutional quality; public expenditure (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-sea
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Citations: View citations in EconPapers (3)

Published in Asian Development Review, 2021, 38 (1), pp.176-206. ⟨10.1162/adev_a_00162⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03770836

DOI: 10.1162/adev_a_00162

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