The authors thank Andreas Kyriacou and Hèctor Sala for valuable comments and suggestions. The authors acknowledge financial support of projects, ECO2010-21668-C03-02 (Ministerio de Ciencia y Tecnología), 2009SGR-2013 and XREPP (Direcció General de Recerca).
ECONOMIC GROWTH AND INEQUALITY: THE ROLE OF FISCAL POLICIES*
Article first published online: 2 SEP 2011
© 2011 The Authors. Australian Economic Papers© 2011 Blackwell Publishing Ltd/University of Adelaide and Flinders University
Australian Economic Papers
Volume 50, Issue 2-3, pages 74–97, September 2011
How to Cite
MUINELO-GALLO, L. and ROCA-SAGALÉS, O. (2011), ECONOMIC GROWTH AND INEQUALITY: THE ROLE OF FISCAL POLICIES. Australian Economic Papers, 50: 74–97. doi: 10.1111/j.1467-8454.2011.00412.x
- Issue published online: 2 SEP 2011
- Article first published online: 2 SEP 2011
This paper examines the impact of different instruments of fiscal policy on economic growth and income inequality. We use an unbalanced panel of 43 upper-middle and high income countries for the period 1972–2006 to assess the incidence of different fiscal policies. The empirical results show that larger current expenditures and direct taxes diminish economic growth and reduce inequality, while increases on public investment reduces inequality without harming output. This suggests that the trade-off between efficiency and equity facing governments when designing their fiscal policies may be avoided.