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Further evidence of the relationship between social transfers and income inequality in OECD countries

Author

Listed:
  • Giorgio D'Agostino
  • Luca Pieroni
  • Margherita Scarlato
Abstract
In this paper, we have revised the estimates of the e ect of social transfers on income in- equality. We have accounted for reverse causality using an instrumental variable derived by a theoretical model, which identi es the main driver of social transfers from the interaction between electoral system and coalition or party winning the elections, and have estimated in the OECD countries that a 1% increase of the share of social transfers reduces the income in- equality by half a percentage point. This result appears to be robust to di erent components of expenditure, alternative model speci cations and falsi cation tests. Only countries with a high corruption level seems to make this empirical regularity questionable; our estimates show that bureacratic ineciencies by corruption are identi ed as responsible of the bene t lacks of social transfers on economic inequality.

Suggested Citation

  • Giorgio D'Agostino & Luca Pieroni & Margherita Scarlato, 2019. "Further evidence of the relationship between social transfers and income inequality in OECD countries," Departmental Working Papers of Economics - University 'Roma Tre' 0244, Department of Economics - University Roma Tre.
    • Handle: RePEc:rtr:wpaper:0244
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    More about this item

    Keywords

    Welfare policy; Social spending; Income inequality; Instrumental variable esti- mation.;
    All these keywords.

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation

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