Essays on fiscal policy and income inequality
type: CreativeWork
description: One of the main problems of economic growth in developing economies is income inequality. Thus many studies in macroeconomic theory have attempted to determine what are the main ways in which inequality can be reduced. Redistributive fiscal policy has been considered an important way to reduce inequality and increase economic growth at same time. Considering the relationship between these variables, this study seeks to clarify how fiscal policy affects income inequality and economic growth. To perform such analysis, we used three different approaches. First we estimate the impacts of fiscal policy on income inequality and economic growth among Brazilian states using a set of panel data models. The analysis covers the ye- ars from 1996 to 2011, comprising 16 years for 26 of the 27 Brazilian states. We estimated an individual equation to explain economic growth and two individual equations for income inequality, each with a different set of explanatory variables. Based on panel data models, we present evidence that the relationship between Tax Burden and economic growth and income inequality is not linear. We show that when the Tax Burden corresponds to 23% of GDP the economic growth is maximum and when the Tax Burden corresponds to 19% of GDP the ine- quality is minimal. Second, we construct a model and analyze the effects of a fiscal policy of income redistribution for Brazilian economy. Specifically, we try to show the effects of an income transfer for the poorest part of the population. We build a dynamic stochastic model calibrated for Brazil. The results show the optimal taxes on capital income and labor income in opposite way in both shocks (government spending and productivity). The composition of the government budget changes according to the favoritism towards the poor. The simulations show that the existence of income inequality changes the optimal level of taxes and the reactions to supply and demand shocks, although the fiscal policy has limits. Also, we …
abstract: One of the main problems of economic growth in developing economies is income inequality. Thus many studies in macroeconomic theory have attempted to determine what are the main ways in which inequality can be reduced. Redistributive fiscal policy has been considered an important way to reduce inequality and increase economic growth at same time. Considering the relationship between these variables, this study seeks to clarify how fiscal policy affects income inequality and economic growth. To perform such analysis, we used three different approaches. First we estimate the impacts of fiscal policy on income inequality and economic growth among Brazilian states using a set of panel data models. The analysis covers the ye- ars from 1996 to 2011, comprising 16 years for 26 of the 27 Brazilian states. We estimated an individual equation to explain economic growth and two individual equations for income inequality, each with a different set of explanatory variables. Based on panel data models, we present evidence that the relationship between Tax Burden and economic growth and income inequality is not linear. We show that when the Tax Burden corresponds to 23% of GDP the economic growth is maximum and when the Tax Burden corresponds to 19% of GDP the ine- quality is minimal. Second, we construct a model and analyze the effects of a fiscal policy of income redistribution for Brazilian economy. Specifically, we try to show the effects of an income transfer for the poorest part of the population. We build a dynamic stochastic model calibrated for Brazil. The results show the optimal taxes on capital income and labor income in opposite way in both shocks (government spending and productivity). The composition of the government budget changes according to the favoritism towards the poor. The simulations show that the existence of income inequality changes the optimal level of taxes and the reactions to supply and demand shocks, although the fiscal policy has limits. Also, we …
author: Saith, Walberti
language: eng
keywords: Política tributária, Renda - Distribuição, Desenvolvimento econômico
date published: 2017-11-21
date modified: 2026-07-24T01:21:25Z
provider: Brazil UFV
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: Universidade Federal de Viçosa