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

Author/Editor:

João Pedro Azevedo ; Antonio David ; Fabiano Rodrigues Rodrigues Bastos ; Emilio Pineda

Publication Date:

May 12, 2014

Electronic Access:

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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.

Series:

Working Paper No. 2014/085

Subject:

Expenditure Fiscal consolidation Fiscal policy Fiscal stance Income inequality National accounts

English

Publication Date:

May 12, 2014

ISBN/ISSN:

9781484385340/1018-5941

Stock No:

WPIEA2014085

Pages:

31

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