Income Inequality and Redistributive Government Spending

International Monetary Fund

No 2003/014, IMF Working Papers from International Monetary Fund

Abstract: The paper examines empirically the question of whether more unequal societies spend more on income redistribution than their more egalitarian counterparts. Theoretical arguments on this issue are inconclusive. The political economy literature suggests that redistributive spending is higher in unequal societies due to median voter preferences. Alternatively, it can be argued that unequal societies may spend less on redistribution because of capital market imperfections. Based on different data sources, the cross-country evidence reported in this paper suggests that more unequal societies do spend less on redistribution.

Keywords: WP; income; GDP; Gini coefficient; spending; Income distribution; government spending; capital deepening; inequality data; factor income; parameter estimate; growth equation; redistributive spending; inequality indicator; income share; after-tax income; low-inequality country; income distribution indicator; inequality-redistribution hypothesis; Income inequality; Personal income; East Asia; Asia and Pacific (search for similar items in EconPapers)
Pages: 25
Date: 2003-01-01
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Citations: View citations in EconPapers (28)

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