Income inequality and fiscal policy over the political cycle: a panel estimation model for emerging markets and developing economies
We assess the fiscal policy responses of Emerging Markets and Developing Economies governments to unexpected shocks that increase income inequality. We focus on the relationship between income inequality and public expenditure, progressive taxation, and public debt. We aim particularly on the strate...
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2021
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| Acceso en línea: | http://sedici.unlp.edu.ar/handle/10915/170427 |
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I19-R120-10915-1704272024-09-20T20:44:23Z http://sedici.unlp.edu.ar/handle/10915/170427 Income inequality and fiscal policy over the political cycle: a panel estimation model for emerging markets and developing economies Carrera, Jorge Eduardo De la Vega, Pablo Toledo, Fernando César 2021-11 2021 2024-09-20T14:03:50Z en Ciencias Económicas Income Inequality Fiscal Policy Panel Data Models We assess the fiscal policy responses of Emerging Markets and Developing Economies governments to unexpected shocks that increase income inequality. We focus on the relationship between income inequality and public expenditure, progressive taxation, and public debt. We aim particularly on the strategic use of public debt to finance greater public expenditure targeted to lessen the negative effects of hikes in income inequality. To this end, we exploit the fact that a government that wants to be reelected will try to avoid social conflict and class struggle related to increases in income inequality. Thus, it is expected that increasing social inequalities induce more political pressures the closer the next executive election is. We estimate dynamic panel models for 49 Emerging Markets and Developing Economies with annual data for the 1990-2015 period. We find that the marginal effect of inequality on the public debt is increasing in the share of the executive term completed, and it becomes statistically significant after completing 85% of the corresponding term. This finding is robust to different empirical specifications and is more pronounced in Latin American Countries and for economies with higher external liabilities. The interaction term is not statistically significant in the other three cases (government consumption, progressive taxation, and the primary balance), which suggests that the relationship between income inequality and these variables is not mediated by the political cycle. However, there is a statistically significant and negative (positive) linear effect on income inequality on the government consumption (primary balance). Facultad de Ciencias Económicas Objeto de conferencia Objeto de conferencia http://creativecommons.org/licenses/by-nc-sa/4.0/ Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0) application/pdf |
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Universidad Nacional de La Plata |
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I-19 |
| repository_str |
R-120 |
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SEDICI (UNLP) |
| language |
Inglés |
| topic |
Ciencias Económicas Income Inequality Fiscal Policy Panel Data Models |
| spellingShingle |
Ciencias Económicas Income Inequality Fiscal Policy Panel Data Models Carrera, Jorge Eduardo De la Vega, Pablo Toledo, Fernando César Income inequality and fiscal policy over the political cycle: a panel estimation model for emerging markets and developing economies |
| topic_facet |
Ciencias Económicas Income Inequality Fiscal Policy Panel Data Models |
| description |
We assess the fiscal policy responses of Emerging Markets and Developing Economies governments to unexpected shocks that increase income inequality. We focus on the relationship between income inequality and public expenditure, progressive taxation, and public debt. We aim particularly on the strategic use of public debt to finance greater public expenditure targeted to lessen the negative effects of hikes in income inequality. To this end, we exploit the fact that a government that wants to be reelected will try to avoid social conflict and class struggle related to increases in income inequality. Thus, it is expected that increasing social inequalities induce more political pressures the closer the next executive election is. We estimate dynamic panel models for 49 Emerging Markets and Developing Economies with annual data for the 1990-2015 period. We find that the marginal effect of inequality on the public debt is increasing in the share of the executive term completed, and it becomes statistically significant after completing 85% of the corresponding term. This finding is robust to different empirical specifications and is more pronounced in Latin American Countries and for economies with higher external liabilities. The interaction term is not statistically significant in the other three cases (government consumption, progressive taxation, and the primary balance), which suggests that the relationship between income inequality and these variables is not mediated by the political cycle. However, there is a statistically significant and negative (positive) linear effect on income inequality on the government consumption (primary balance). |
| format |
Objeto de conferencia Objeto de conferencia |
| author |
Carrera, Jorge Eduardo De la Vega, Pablo Toledo, Fernando César |
| author_facet |
Carrera, Jorge Eduardo De la Vega, Pablo Toledo, Fernando César |
| author_sort |
Carrera, Jorge Eduardo |
| title |
Income inequality and fiscal policy over the political cycle: a panel estimation model for
emerging markets and developing economies |
| title_short |
Income inequality and fiscal policy over the political cycle: a panel estimation model for
emerging markets and developing economies |
| title_full |
Income inequality and fiscal policy over the political cycle: a panel estimation model for
emerging markets and developing economies |
| title_fullStr |
Income inequality and fiscal policy over the political cycle: a panel estimation model for
emerging markets and developing economies |
| title_full_unstemmed |
Income inequality and fiscal policy over the political cycle: a panel estimation model for
emerging markets and developing economies |
| title_sort |
income inequality and fiscal policy over the political cycle: a panel estimation model for
emerging markets and developing economies |
| publishDate |
2021 |
| url |
http://sedici.unlp.edu.ar/handle/10915/170427 |
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1824075690059759616 |