عوامل مشترک سیاست مالی، نابرابری درآمد و رشد اقتصادی

This paper analyses the relationship between income inequality and economic growth through fiscal policy. To this end, we present and estimate two systems of structural equations with error components through which gross income inequality determines different fiscal policy outcomes, which subsequently affects the evolution of economic growth and net income inequality. The empirical results, obtained using an unbalanced panel data of 21 high-income OCDE countries during the period 1972–2006, suggest that gross income inequality is a significant determinant of fiscal policy outcomes. Additionally, the results show that distributive expenditures and direct taxes may produce significant reductions in GDP growth and net income inequality reflecting the standard efficiency–equity trade-off associated to certain fiscal policy measures. Finally, the results also indicate that the most adequate fiscal policy strategy in a context of fiscal consolidation is to cut non distributive expenditure, since this could increase GDP growth while reducing income inequality.

The reduction of economic disparities has emerged as one of the most challenging public policy topics in macroeconomic literature. A central concern of this discussion is the role that government policies may play in reducing economic inequalities, and determining the effects on economic growth rate.1 In this context, the selection of a distributive fiscal policy strategy has become of crucial importance in achieving a broad-based stable path of economic growth across countries. Nevertheless, fiscal policies vary considerably across nations. Some have low tax rates, others a sharply progressive fiscal system; in many countries the public sector is responsible for financing essential services (such as social protection, education, health, and housing), while others have left a large part to families, local communities, and employers.2 The choice of different public policies may be the outcome of the economic and political interests of different social groups. In this context, gross income inequality (pre-tax and government transfers' income inequality) could be an important determinant of economic policy decisions. In turn, these policy outcomes may be determinants of the joint evolution of economic growth and net income inequality (post tax and government transfers income distribution). Growth and inequality political economy models relate income distribution with economic growth through fiscal policy (see Bénabou, 1996b). These models allow the incorporation of political and economic structures in the analysis of the relationship between growth and inequality. Thus, political processes capture the way in which citizens' preferences are transferred to different fiscal policy outcomes, while economic structures determine both the effects in terms of the efficiency and equity of these policies. Despite its demonstrated relevance, few empirical studies have attempted to analyse the possibility of a mutually influential relationship between inequality and growth through the “fiscal channel”.3 Besides, most of this empirical evidence is based on separately estimated regressions, analysing the growth effect of fiscal policy,4 or alternatively the distributive effects of fiscal policy.5 None of these studies considers the role of gross income inequality on the determination of fiscal policy outcomes in a mutually influential relationship between growth and net income inequality, as we propose in this paper. Based on the approach by Bénabou (2000), the aim of this research is to develop and estimate a complete empirical model of joint determinants of fiscal policy, inequality, and economic growth. The study first analyses the importance of gross income inequality and other institutional, demographic and economic explanatory factors on the election of different fiscal policy outcomes. And secondly, it evaluates how effective these policies are in reducing net income inequality and also their effects in terms of macroeconomic efficiency. For this purpose, a complete system of three equations has been constructed for an unbalanced panel of 21 high income-countries for the period 1972–2006. This paper's contribution is thus twofold. First, it analyses the importance of different institutional, demographic and economic factors in determining the fiscal policy options of an extended panel of high-income countries. Second, it allows us to identify the potential effects and policy implications of different fiscal policy strategies in a mutually influential relationship between economic growth and net income inequality. The paper is organised as follows. Section 2 provides a theoretical framework, where different hypotheses concerning the determinants of fiscal policy and their impact on economic growth and net income inequality are discussed. Section 3 discusses the model, while Section 4 describes the database and details the empirical methodology. In Section 5, the empirical results are presented. Finally, Section 6 contains some concluding remarks.

Due to the importance of fiscal policy as a redistributive tool and as an instrument to promote economic growth, it is commonly considered one of the key mechanisms to achieve goals in terms of efficiency and equity. In this article we investigate whether, to what extent, and through which components, fiscal policy generates a trade-off between economic growth and income inequality. To this end we estimate two different systems of structural equations with error components through which gross income inequality determines different fiscal policy outcomes, which subsequently affect the evolution of economic growth and net income inequality. Although empirical literature has dealt separately with, on the one hand the growth and inequality effects of fiscal policies, and on the other hand the relationship between income inequality and growth, the issue of the sign and magnitude of the efficiency and distributive effects of fiscal policies is still very much an open question. This paper contributes to the scarce existing evidence on this issue and, in turn, establishes the important role of gross income inequality on the determination of fiscal policy outcomes in a mutually influential relationship between growth and inequality. The empirical results obtained using an unbalanced panel of 21 high-income OCDE countries for the period 1972–2006 suggest that the more egalitarian a country is, the larger its public sector (in terms of expenditures and taxes over their GDP). Moreover, richer economies in the sample use more intensively distributive expenditures and direct taxes while poorer economies distributive expenditures and indirect taxes. These results confirm the important role of gross income inequality on the determination of fiscal policy outcomes pointed out by Bénabou (2000). Importantly, the results indicate that increasing distributive expenditure in high income countries with a well established welfare state (our sample) reduces income inequality but does not necessarily harm GDP growth (it depends on how this public spending is financed). And, alternatively, rising non-distributive expenditure decreases GDP growth while increasing income inequality, regardless of how it is financed. The results can also be interpreted in the sense that distributive expenditures and direct taxes may produce significant reductions in GDP growth and net income inequality. This finding is consistent with previous empirical evidence, which reveal non-Keynesian effects associated to public spending or direct taxes on growth (Barro, 1990, Barro, 2008 and Castelló-Climent, 2010), and also important redistributive effects of the same fiscal policies (see Afonso et al., 2010 and Muinelo-Gallo and Roca-Sagalés, 2011b). In short, this result reflects the standard efficiency–equity trade-off of fiscal policy: the smaller the government, the larger the pie, but it will be less equally distributed. The results also show that the only fiscal policy that can break the trade-off between efficiency and equity are non distributive expenditures, since a cut in this kind of government expenditures reduces inequality while increasing economic growth. However, the results are highly inconclusive concerning indirect taxes. The indirect tax equations have very low explanatory power, so their results must be treated with utmost caution. Our results have important policy implications, particularly in a context of fiscal consolidation in the majority of the high income countries included in our sample. First, for countries which may experience difficulties in financing their public deficits (as is the case over the last years of Greece, Portugal, Spain, Ireland but also Japan, United States and United Kingdom), the most appropriate fiscal policy to increase growth while reducing income inequality is to cut non-distributive expenditures. The alternative of reducing distributive expenditure may have an important social cost in terms of increasing income inequality, something that eventually may aggravate problems related to poverty (Bourguignon, 2003). In summary, and according to the results presented, we claim first that it is important to incorporate gross income inequality as a significant determinant of fiscal policies, and consequently, it is also an important variable to take into account when estimating the growth and distributive effects of fiscal policies. And second, the choice of fiscal policy strategy is of crucial importance for promoting balanced economic development. The alternative could be a scenario of economic recovery but also increasing interpersonal income disparities.