In this article we use Vector Autoregression (VAR) models to evaluate through which component, spending or taxation, is the fiscal policy more effective in promoting income distribution and economic growth. Our results uncover current spending as the most effective mechanism to reduce inequality, although direct taxation is also found relevant. Whatever the case, fiscal policies aiming at reducing inequality cause lower economic growth.
|Number of pages||17|
|Journal||Papeles de Economía Española|
|Publication status||Published - 2013|
- Income inequality
- Economic growth
- Fiscal policy
- VAR models