The Distributional Effects of Public Expenditure

Abstract

It is commonly agreed that economic policies, including budgetary policies, can have potentially strong distributional effects. Traditional economic analysis held that economic policies affected the income distribution primarily through their impact on the rate of growth. More recently, it has come to be recognised that qualitative aspects of economic growth are probably more important than the rate of growth itself. While recent research has confirmed the potential role of expenditure policies as a redistributive tool, it has also shown that redistribution does not necessarily have to come at the expense of economic growth and efficiency. Although there are substantial analytical and technical problems to be faced in the design of equitable and cost-effective public expenditure programmes, unfavourable distributional outcomes of these programmes can usually be traced more to political and institutional pressures than to purely technical factors. JEL Classification number: H5

The Impact of Tax and Expenditure Policies on Income Distribution: Evidence from a Large Panel of Countries

“…This is due to the issue of the difficulty of targeting of distributional expenditure policies which has been discussed buy a number of authors (Aspe and Sigmund, 1984;Aspe, 1993;Birdsall and James, 1993;Gonzalez, 1995;Harberger, 1998;Schwartz and Ter-Minassian, 2000). It is quite difficult to target the poor with regular education and health spending because, among other reasons, these programs are in many countries located in urban areas thus not directly benefiting the rural poor or even those in the informal settlements in urban areas.…”

Government Fiscal Policies and Redistribution in Asian Countries

“…The difficulties involved in targeting distributional expenditure policies which has been discussed in many studies (e.g. Aspe and Sigmund, 1984;Aspe, 1993;Birdsall and James, 1993;Harberger, 1998;Schwartz and Ter-Minassian, 2000). Despite this problem, many education and health spending programs have been found to be equalizing and poverty reducing (Paternostro et al, 2007).…”

Public spending on agricultural productivity and rural commercialization: A comparison of impacts using an economy‐wide approach

“…We assume that the government plans to invest an amount equal to 2% (roughly USD 0.5 billion or 7.5 billion Ethiopian birr (ETB) of the 2010 GDP), which is realistically below the 19% and 3% share, respectively, of the overall budget and agricultural sector budget to GDP in the same year (World Bank, 2016). 3 Identifying a feasible source of finance is crucial as this can have relevant macroeconomic and distributional implications (Kaya, Kaya, & Gunter, 2013;Schwartz & Ter-Minassian, 2000). Building heavily on the public finance structure in Ethiopia, three realistic funding sources are considered, and: (a) the relative efficiency of the investment options is evaluated; and (b) an assessment of the macroeconomic and distributional implications of each funding option is carried out.…”