Fiscal Adjustment and Income Inequality: Sub-national Evidence from Brazil

By João Pedro Azevedo, Antonio David, Fabiano Rodrigues Rodrigues Bastos, Emilio Pineda

May 12, 2014

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João Pedro Azevedo, Antonio David, Fabiano Rodrigues Rodrigues Bastos, and Emilio Pineda. Fiscal Adjustment and Income Inequality: Sub-national Evidence from Brazil, (USA: International Monetary Fund, 2014) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

We combine state-level fiscal data with household survey data to assess the links between sub-national fiscal policy and income inequality in Brazil over the period 1995-2011. The results indicate that a tighter fiscal stance at the sub-national level is not associated with a deterioration in inequality measures. This finding contrasts with the conclusions of several papers in the burgeoning literature on the effects of fiscal consolidation on inequality using national data for OECD economies. In addition, we find that a tighter stance is typically positively associated with a measure of “shared prosperity”. Hence, our results caution against extrapolating policy implications of the literature focusing on advanced economies to other settings.

Subject: Expenditure, Fiscal consolidation, Fiscal policy, Fiscal stance, Income inequality, National accounts

Keywords: Average earnings, Brazil, Expenditure elasticity, Fiscal Adjustment, Fiscal consolidation, Fiscal Policy, Fiscal stance, Income Inequality, Inequality measure, Investment expenditure, Revenue transfer, State characteristic, State GDP, Time trend, Western Europe, WP

Publication Details

Pages:

31
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/085
Stock No:

WPIEA2014085
ISBN:

9781484385340
ISSN:

1018-5941

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