Cross-country evidence on the distributional impact of fiscal policy

This article provides new evidence on the distributional effects of fiscal policy using data on a panel of OECD economies over the last four decades. We study how four measures of income inequality and poverty respond to several stock and flow variables accounting for fiscal actions. We find that increases in government debt and expenditure promote a less unequal distribution of income. We detect a significant distributional impact of education and social spending as well as of government consumption expenditure. We also investigate potential redistributive implications of large fiscal expansion and consolidation episodes finding no evidence of additional effects beyond those associated with conventional fiscal variables.