{
  "title": "Reallocating Public Spending to Reduce Income Inequality: Can It Work?",
  "publication": "IMF Working Papers, September 6, 2019",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2019/09/06/reallocating-public-spending-to-reduce-income-inequality-can-it-work-48607",
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  "summary": "Can a government reduce income inequality by changing the composition of public spending while keeping the total level of expenditure fixed?",
  "sections": [
    {
      "heading": "Key question and scope",
      "content": "- Can a government reduce income inequality by changing the composition of public spending while keeping the total level of expenditure fixed?\n- Empirical scope: newly assembled data on spending composition for 83 countries across all income groups.\n- Paper format: IMF Working Paper, 51 pages, Working Paper No. 2019/188."
    },
    {
      "heading": "Main empirical findings",
      "content": "- Reallocating spending toward social protection and infrastructure is associated with reduced income inequality.\n- The association is particularly strong when the reallocation is financed through cuts in defense spending.\n- No evidence that lowering defense spending to finance infrastructure and social outlays improves income distribution in countries with weak institutions and at higher risk of conflict.\n- Reallocating social protection and infrastructure spending towards other types of spending tends to increase income inequality.\n- Accounting for the long-term impact of health spending, and particularly education spending, helps to better capture the equalizing effects of these expenditures."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Prioritize reallocations toward social protection and infrastructure to reduce income inequality, conditional on institutional and security contexts.\n- When feasible and appropriate given security and institutional considerations, consider financing pro-equality reallocation through defense spending reductions.\n- Exercise caution in weak-institution, high-conflict environments: defense cuts to finance social and infrastructure outlays do not necessarily yield improvements in income distribution in these settings.\n- Incorporate long-term returns to health and education spending when evaluating the distributional impact of public expenditure reallocations."
    },
    {
      "heading": "Contextual application",
      "content": "- The paper includes a discussion of implications for Indonesia, described as a major emerging market where income inequality is central to policy debates."
    },
    {
      "heading": "Subject and keywords (as provided)",
      "content": "- Subject: Defense spending, Education spending, Expenditure, Health care spending, Income distribution, Income inequality, National accounts\n- Keywords: Asia and Pacific, Defense spending, Defense spendingAotal spending, Education spending, expenditure category, expenditure t-1, Global, Health care spending, income inequality, Income inequality, income share, inequality data, infrastructure t-1, market income, net Gini coefficient, public spending policy, remained flat, wealth Gini Index, WP\n\nDjeneba Doumbia and Tidiane Kinda, \"Reallocating Public Spending to Reduce Income Inequality: Can It Work?\", IMF Working Papers 2019, 188 (2019); DOI: https://doi.org/10.5089/9781513511863.001.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2019/09/06/reallocating-public-spending-to-reduce-income-inequality-can-it-work-48607"
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    "Authors: Djeneba Doumbia, Tidiane Kinda",
    "Published: September 6, 2019",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513511863.001",
    "Can a government reduce income inequality by changing the composition of public spending while keeping the total level of expenditure fixed?",
    "Empirical scope: newly assembled data on spending composition for 83 countries across all income groups.",
    "Paper format: IMF Working Paper, 51 pages, Working Paper No. 2019/188.",
    "Reallocating spending toward social protection and infrastructure is associated with reduced income inequality.",
    "The association is particularly strong when the reallocation is financed through cuts in defense spending.",
    "No evidence that lowering defense spending to finance infrastructure and social outlays improves income distribution in countries with weak institutions and at higher risk of conflict.",
    "Reallocating social protection and infrastructure spending towards other types of spending tends to increase income inequality.",
    "Accounting for the long-term impact of health spending, and particularly education spending, helps to better capture the equalizing effects of these expenditures.",
    "Prioritize reallocations toward social protection and infrastructure to reduce income inequality, conditional on institutional and security contexts.",
    "When feasible and appropriate given security and institutional considerations, consider financing pro-equality reallocation through defense spending reductions.",
    "Exercise caution in weak-institution, high-conflict environments: defense cuts to finance social and infrastructure outlays do not necessarily yield improvements in income distribution in these settings.",
    "Incorporate long-term returns to health and education spending when evaluating the distributional impact of public expenditure reallocations.",
    "The paper includes a discussion of implications for Indonesia, described as a major emerging market where income inequality is central to policy debates.",
    "Subject: Defense spending, Education spending, Expenditure, Health care spending, Income distribution, Income inequality, National accounts",
    "Keywords: Asia and Pacific, Defense spending, Defense spendingAotal spending, Education spending, expenditure category, expenditure t-1, Global, Health care spending, income inequality, Income inequality, income share, inequality data, infrastructure t-1, market income, net Gini coefficient, public spending policy, remained flat, wealth Gini Index, WP",
    "**Working Paper**"
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