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

The paper combines 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-nat...

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Bibliographic Details
Main Authors:	Azevedo, Joao Pedro, David, Antonio C., Rodrigues Bastos, Fabiano, Pineda, Emilio
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	ACCOUNTING ADJUSTMENT PERIOD ADJUSTMENT PROCESS ADVERSE EFFECT AMORTIZATION BANK POLICY BENEFICIARY BOND BUDGET DEFICIT BUSINESS CYCLE BUSINESS CYCLES CAPITAL ACCUMULATION CASH TRANSFERS CENTRAL BANK CENTRAL GOVERNMENT CHECKS COEFFICIENTS COMMODITY PRICE COMMODITY PRICES CONVERGENCE EFFECTS CORPORATE INCOME TAXES CROSS-COUNTRY ANALYSIS CROSS-COUNTRY DATA CROSS-COUNTRY STUDIES CURRENT EXPENDITURES DEBT BURDENS DEBT LEVEL DEBT LEVELS DEBT RESTRUCTURING DEBT RESTRUCTURING AGREEMENT DEBT STOCK DECLINING INEQUALITY DEFLATORS DEMOGRAPHIC FACTORS DEPENDENT VARIABLE DESCRIPTIVE STATISTICS DEVELOPED ECONOMIES DEVELOPING COUNTRIES DEVELOPMENT BANK DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DISBURSEMENTS DISPOSABLE INCOME DISTRIBUTIONAL EFFECTS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC INEQUALITY ECONOMIC RESEARCH ECONOMIC THEORY EFFICIENCY GAINS EFFICIENT USE EFFICIENT USE OF PUBLIC RESOURCES EMERGING ECONOMIES EMERGING MARKETS EMPIRICAL EVIDENCE EMPIRICAL LITERATURE EQUITY CONCERNS EXPENDITURE EXPENDITURE CATEGORY EXPENDITURE CUTS EXPENDITURE POLICIES EXPENDITURES EXPENDITURES ON EDUCATION EXPLAINING INEQUALITY FEDERAL COUNTRY FEDERAL DISTRICT FEDERAL REGULATIONS FEDERAL REVENUE FINANCIAL CRISIS FINANCIAL OPENNESS FISCAL ADJUSTMENT FISCAL BALANCE FISCAL BALANCES FISCAL DECENTRALIZATION FISCAL DISCIPLINE FISCAL FEDERALISM FISCAL INSTITUTIONS FISCAL PERFORMANCE FISCAL POLICY FISCAL SPACE FISCAL VARIABLES GDP GDP DEFLATOR GDP PER CAPITA GINI COEFFICIENT GOVERNMENT SPENDING GROWTH THEORIES HETEROSKEDASTICITY HIGH INFLATION HOUSEHOLD INCOME HOUSEHOLD SIZE HUMAN CAPITAL INCOME DISTRIBUTION INCOME INEQUALITY INCOME TAXES INCREASED INEQUALITY INCREASING INEQUALITY INDEBTEDNESS INEQUALITY DYNAMICS INEQUALITY INDICATORS INEQUALITY MEASURE INEQUALITY MEASURES INFLATION INFLATION RATE INFRASTRUCTURE INVESTMENT INSTRUMENT INTEREST PAYMENTS INTEREST RATE INTEREST RATE PAYMENTS INTERNATIONAL BANK INTERNATIONAL FINANCIAL MARKETS INVESTMENT CLIMATE INVESTMENT SPENDING JOB CREATION LABOR MARKETS LAGGED DEPENDENT LOG INCOME MACROECONOMIC CONDITIONS MACROECONOMIC DETERMINANTS MACROECONOMIC FACTORS MACROECONOMIC PERFORMANCE MACROECONOMIC POLICIES MACROECONOMIC RISK MACROECONOMIC STABILIZATION MACROECONOMIC VARIABLES MARGINAL PRODUCT MINISTRY OF FINANCE MONETARY ECONOMICS MONETARY FUND MORAL HAZARD MUNICIPAL EXPENDITURES MUNICIPALITIES NATIONAL TREASURY NEGATIVE COEFFICIENT NEGATIVE IMPACT NULL HYPOTHESIS OUTPUT GAP PENSION PENSIONS PER CAPITA GROWTH PER CAPITA GROWTH RATE PER CAPITA INCOME PERSONAL INCOME PERSONAL INCOME TAXES POLARIZED SOCIETIES POLICY CHANGES POLICY DISCUSSIONS POLICY IMPLICATIONS POLICY MAKING POLICY RESEARCH POLICY VARIABLES POLITICAL ECONOMY POTENTIAL OUTPUT POVERTY DYNAMICS POVERTY REDUCTION PRICE FLUCTUATIONS PROPERTY TAXES PUBLIC EXPENDITURE PUBLIC EXPENDITURES PUBLIC FINANCES PUBLIC INVESTMENT PUBLIC SPENDING RANDOM EFFECTS REAL GDP REDISTRIBUTION REDISTRIBUTION POLICIES REDISTRIBUTIVE POLICY REGRESSION RESULTS REGRESSIVE TAXES RELATIVE IMPORTANCE RELATIVE SUPPLY RENEGOTIATION RETURN RETURNS REVENUE COLLECTION REVENUE ELASTICITY REVENUE GROWTH REVENUE INCREASES REVENUE MOBILIZATION RISK FACTOR SAFETY NETS SECTOR EMPLOYMENT SENSITIVITY ANALYSIS SERIAL CORRELATION SIGNIFICANT DIFFERENCES SIGNIFICANT EFFECT SKILLED LABOR SKILLED WORKERS SOCIAL SAFETY SOCIAL SAFETY NETS STATE GOVERNMENTS STATIC ANALYSIS SUB-NATIONAL SUB-NATIONAL DEBT SUB-NATIONAL ENTITIES SUBNATIONAL TAX TAX BUOYANCY TAX BURDEN TAX REVENUE TAX REVENUES TAX SYSTEM TAXATION TOTAL EXPENDITURE TOTAL REVENUE UNEMPLOYMENT UNEMPLOYMENT RATE WARRANTS ZERO ELASTICITY
Online Access:	http://documents.worldbank.org/curated/en/2014/06/19713139/fiscal-adjustment-income-inequality-sub-national-evidence-brazil http://hdl.handle.net/10986/19379

Description
Summary:	The paper combines 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, the authors find that a tighter stance is typically positively associated with a measure of "shared prosperity". Hence, the results caution against extrapolating policy implications of the literature focusing on advanced economies to other settings.

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

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