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The Effects of Social Spending on Income Inequality in 30 OECD Countries

Year 2021, Volume: 71 Issue: 1, 39 - 57, 16.07.2021

Abstract

Social spending programs began to be implemented in the post-World War II period owing to the positive developments in economic and demographic indicators. In the following years, governments used social spending programs to eliminate income differences between income groups due to their increasing social benefit function. Hence, the redistribution of income from high-income groups to low-income groups occurs through taxation. The unfairly distributed income lead to not direct human capital and public resources for productive economic activities. Accordingly, governments try to minimize or remove the negative effects of income inequality by social spendings. The study aims at investigating the relationship between social spendings and income inequality in 2009, 2011, the years when the effect of the 2008 crisis observed in the world, and 2015 not being the crisis year by the OLS method by cross-section regression analysis in 30 OECD countries. The analysis results show that an increase in social spending reduces income inequality. Moreover, trade openness negatively affects income inequality, unemployment increases income inequality, and it is possible to interpret that the positive effect of social expenditures on income distribution decreased during the crisis years by compared to the year-based estimation results.

References

  • Aaberge, R.., Eika, L., Lang0rgen, A., & Mogstad, M. (2019). Local governments, in-kind transfers, and economic inequality. Journal of Public Economics, 180(C). https://doi.org/10.1016/j. jpubeco.2018.09.015 google scholar
  • Afonso, A., Schuknecht, L., & Tanzi, V. (2008). Income distribution determinants and public spending efficiency. (ECB Working Paper No. 861). Retrieved from https://www.ecb.europa.eu/pub/pdf/ scpwps/ecbwp861.pdf google scholar
  • Baldacci E, Clements B., Gupta S., & Cui, Q. (2008). Social spending, human capital, and growth in developing countries. World Development, 36(8), 1317-41. https://doi.Org/10.1016/j. worlddev.2007.08.003 google scholar
  • Bastagli, F., Coady, D., & Gupta, S. (2012). Income inequality and fiscal policy (IMF Staff Discussion Note No: SDN/12/08). Retrieved from https://www.imf.org/external/pubs/ft/sdn/2012/sdn1208.pdf google scholar
  • Bouvet, F. (2010). EMU and the dynamics of regional per capita income inequality in Europe. J Econ Inequal,8, 323-344. https://doi.org/10.1007/s10888-010-9129-0 google scholar
  • Breunig, R., & Majeed, O. (2020). Inequality, poverty and economic growth. International Economics, 161, 83-99. https://doi.org/10.1016/j.inteco.2019.11.005 google scholar
  • Cammeraat, E. (2020). The relationship between different social expenditure schemes and poverty, inequality and economic growth. International Social Security Review, 73, 101-123. https://doi. org/10.1111/issr.12236 google scholar
  • D’Agostino, G., Pieroni, L., & Scarlato, M. (2020). Social transfers and income inequality in OECD countries. Structural Change and Economic Dynamics, 52, 313-327. https://doi.org/10.1016/j. strueco.2019.11.004 google scholar
  • Doerrenberg, P., & Peichl, A. (2014). The impact of redistributive policies on inequality in OECD countries. Applied Economics, 46(17), 2066-2086. http://dx.doi.org/10.1080/00036846.2014.89 2202 google scholar
  • Doumbia, & Kinda, T. (2019). Reallocating Public Spending to Reduce Income Inequality: Can It Work? (IMF Working Paper No: WP/19/188). Retrieved from https://www.imf.org/en/Publications/WP/ Issues/2019/09/06/Reallocating-Public-Spending-to-Reduce-Income-Inequality-Can-It-Work-48607 google scholar
  • Eroğlu, N., Altaş, D., Ün, T., & Ulu, M. İ. (2017). OECD ülkelerinde sosyal yardım harcamalarının gelir dağılımına etkisi: Panel veri analizi. Uluslararası Ekonomik Araştırmalar Dergisi, 3(3), 335-354. Retrieved from https://dergipark.org.tr/tr/download/article-file/792862 google scholar
  • Fuest, C., Niehues, J., & Peichl, A. (2009). The Redistributive Effects of Tax Benefit Systems in the Enlarged EU (IZA Discussion Paper No. 4520). Retrieved from http://ftp.iza.org/dp4520.pdf google scholar
  • Goni, E., Lopez, J.H., & Serven, L. (2008). Fiscal redistribution and income inequality in Latin America. Policy Research Working Paper, 4487, 1-31. https://doi.org/10.1016/j.worlddev.2011.04.025 google scholar
  • Grosh, M., Ninno, C., Tesliuc, E., & Ouerghi, A. (2008). For protection and promotion: The design and implementation of effective safety nets. Washington DC, NW: The International Bank for Reconstruction and Development / The World Bank. google scholar
  • Gujarati, D. N., & Porter, D. C. (2009). Basic econometrics. Boston, Mass: McGraw-Hill. google scholar
  • Holzner, M. (2010). Inequality, grothw and public spending in Central, East and Southeast Europe (ECINEQ Working Paper No. 71). Retrieved from https://wiiw.ac.at/inequality-growth-and-public-spending-in-central-east-and-southeast-europe-dlp-2202.pdf google scholar
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  • İlgün, M. F. (2015). Kamu sosyal harcamalarının gelir dağılımı üzerindeki etkisi: OECD ülkelerine yönelik panel veri analizi. Dokuz Eylül Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, 17(4), 493-516. https://doi.org/10.16953/deusbed.80724 google scholar
  • Kriegera, T., & Meierrieks, D. (2016). Political capitalism: The interaction between income inequality, economic freedom and democracy. European Journal of Political Economy, 45, 115-132. https:// doi.org/10.1016/j.ejpoleco.2016.10.005 google scholar
  • Meschi, E., & Vivarelli, M. (2009). Trade and income inequality in developing countries. World Development, 37(2), 287-302. https://doi.org/10.1016/j.worlddev.2008.06.002 google scholar
  • Muinelo-Gallo, L., & Roca-Sagales, O. (2013). Joint determinants of fiscal policy, income inequality and economic growth. Economic Modelling, 30, 814-824. https://doi.org/10.1016/j. econmod.2012.11.009 google scholar
  • Niehues, J. (2010). Social spending generosity and income inequality: A dynamic panel approach (IZA Discussion Paper No. 5178). Retrieved from IZA Institute of Labor Economics website: http://ftp. iza.org/dp5178.pdf google scholar
  • OECD (2020). Income inequality (indicator). doi: 10.1787/459aa7f1-en google scholar
  • OECD (2020). Social spending (indicator). doi: 10.1787/7497563b-en google scholar
  • OECD (2020). Trade in goods and services (indicator). doi: 10.1787/0fe445d9-en google scholar
  • Ospina M. (2010). The effect of social spending on income inequality: An analysis for Latin American countries (Documentos de Trabajo CIEF No. 010615). Retrieved from https://papers.ssrn.com/ sol3/papers.cfm?abstract_id=2427510 google scholar
  • Sanchez, A., & Perez-Corral, A. L. (2018). Government social expenditure and income inequalities in the European Union. Hacienda Pûblica Espanola / Review of Public Economics, 227, 133-156. https://doi.org/10.7866/HPE-RPE.18.4.5 google scholar
  • Ulu, M. İ. (2018). The effect of government social spending on income inequality in OECD: A panel data analysis. International Journal of Economics Politics Humanities and Social Sciences, 1(3), 184202. Retrieved from https://dergipark.org.tr/tr/download/article-file/554520 google scholar
  • Wooldridge, J. M. (2013). Introductory econometrics: A modern approach (5th ed.). Mason, OH: South-Western Cengage Learning. google scholar
  • World Bank (2020). Unemployment, total (% of total labor force) (national estimate) (indicator). Retrieved from https://data.worldbank.org/indicator/SL.UEM.TOTL.NE.ZS google scholar

30 OECD Ülkesinde Sosyal Harcamaların Gelir Eşitsizliği Üzerindeki Etkisi

Year 2021, Volume: 71 Issue: 1, 39 - 57, 16.07.2021

Abstract

Sosyal harcama programları İkinci Dünya Savaşı sonrasındaki dönemde yaşanan olumlu ekonomik ve demografik gelişmeler sonucu uygulanmaya başlamıştır. Daha sonraki yıllarda ise hükümetler sosyal faydayı artırma fonksiyonundan dolayı sosyal harcama programlarını gelir grupları arasındaki gelir farklılıklarının giderilmesi amacıyla bir araç olarak kullanmıştır. Böylece, vergilendirme yoluyla gelirin yüksek gelirli gruplardan düşük gelirli gruplara transferiyle yeniden dağıtımı gerçekleşmektedir. Adaletsiz dağıtılan gelir, beşeri sermaye ve kamu kaynaklarının verimli ekonomik faaliyetlere yönlendirilmemesine yol açmaktadır. Bu nedenle hükümetler sosyal harcamalarla gelir eşitsizliğinin olumsuz etkilerini en aza indirmeye veya tamamen kaldırmaya çalışmaktadırlar. Çalışma 2008 krizinin etkisinin dünyada hissedildiği yıllar olan 2009, 2011 ve kriz yılı olmayan 2015 yıllarında seçilmiş 30 OECD ülkesindeki sosyal harcamalar ile gelir eşitsizliği arasındaki ilişkiyi incelemeyi amaçlamaktadır. Analiz sonuçları, sosyal harcamalardaki artışın gelir eşitsizliğini azalttığını göstermektedir. Aynı zamanda, ticari açıklığın gelir eşitsizliğini olumsuz yönde etkilediği, işsizliğin gelir eşitsizliğini artırdığı ve yıl bazlı tahmin sonuçları karşılaştırıldığında ise, sosyal harcamaların gelir dağılımına yönelik olumlu etkisinin kriz yıllarında azaldığı yorumunu yapmak mümkündür.

References

  • Aaberge, R.., Eika, L., Lang0rgen, A., & Mogstad, M. (2019). Local governments, in-kind transfers, and economic inequality. Journal of Public Economics, 180(C). https://doi.org/10.1016/j. jpubeco.2018.09.015 google scholar
  • Afonso, A., Schuknecht, L., & Tanzi, V. (2008). Income distribution determinants and public spending efficiency. (ECB Working Paper No. 861). Retrieved from https://www.ecb.europa.eu/pub/pdf/ scpwps/ecbwp861.pdf google scholar
  • Baldacci E, Clements B., Gupta S., & Cui, Q. (2008). Social spending, human capital, and growth in developing countries. World Development, 36(8), 1317-41. https://doi.Org/10.1016/j. worlddev.2007.08.003 google scholar
  • Bastagli, F., Coady, D., & Gupta, S. (2012). Income inequality and fiscal policy (IMF Staff Discussion Note No: SDN/12/08). Retrieved from https://www.imf.org/external/pubs/ft/sdn/2012/sdn1208.pdf google scholar
  • Bouvet, F. (2010). EMU and the dynamics of regional per capita income inequality in Europe. J Econ Inequal,8, 323-344. https://doi.org/10.1007/s10888-010-9129-0 google scholar
  • Breunig, R., & Majeed, O. (2020). Inequality, poverty and economic growth. International Economics, 161, 83-99. https://doi.org/10.1016/j.inteco.2019.11.005 google scholar
  • Cammeraat, E. (2020). The relationship between different social expenditure schemes and poverty, inequality and economic growth. International Social Security Review, 73, 101-123. https://doi. org/10.1111/issr.12236 google scholar
  • D’Agostino, G., Pieroni, L., & Scarlato, M. (2020). Social transfers and income inequality in OECD countries. Structural Change and Economic Dynamics, 52, 313-327. https://doi.org/10.1016/j. strueco.2019.11.004 google scholar
  • Doerrenberg, P., & Peichl, A. (2014). The impact of redistributive policies on inequality in OECD countries. Applied Economics, 46(17), 2066-2086. http://dx.doi.org/10.1080/00036846.2014.89 2202 google scholar
  • Doumbia, & Kinda, T. (2019). Reallocating Public Spending to Reduce Income Inequality: Can It Work? (IMF Working Paper No: WP/19/188). Retrieved from https://www.imf.org/en/Publications/WP/ Issues/2019/09/06/Reallocating-Public-Spending-to-Reduce-Income-Inequality-Can-It-Work-48607 google scholar
  • Eroğlu, N., Altaş, D., Ün, T., & Ulu, M. İ. (2017). OECD ülkelerinde sosyal yardım harcamalarının gelir dağılımına etkisi: Panel veri analizi. Uluslararası Ekonomik Araştırmalar Dergisi, 3(3), 335-354. Retrieved from https://dergipark.org.tr/tr/download/article-file/792862 google scholar
  • Fuest, C., Niehues, J., & Peichl, A. (2009). The Redistributive Effects of Tax Benefit Systems in the Enlarged EU (IZA Discussion Paper No. 4520). Retrieved from http://ftp.iza.org/dp4520.pdf google scholar
  • Goni, E., Lopez, J.H., & Serven, L. (2008). Fiscal redistribution and income inequality in Latin America. Policy Research Working Paper, 4487, 1-31. https://doi.org/10.1016/j.worlddev.2011.04.025 google scholar
  • Grosh, M., Ninno, C., Tesliuc, E., & Ouerghi, A. (2008). For protection and promotion: The design and implementation of effective safety nets. Washington DC, NW: The International Bank for Reconstruction and Development / The World Bank. google scholar
  • Gujarati, D. N., & Porter, D. C. (2009). Basic econometrics. Boston, Mass: McGraw-Hill. google scholar
  • Holzner, M. (2010). Inequality, grothw and public spending in Central, East and Southeast Europe (ECINEQ Working Paper No. 71). Retrieved from https://wiiw.ac.at/inequality-growth-and-public-spending-in-central-east-and-southeast-europe-dlp-2202.pdf google scholar
  • Howard, M. C. (1988). The General Equilibrium Theory of Distribution. In Asimakopulos (ed.), Theories of Income Distribution (pp. 181-197). https://doi.org/10.1007/978-94-009-2661-5_8 google scholar
  • İlgün, M. F. (2015). Kamu sosyal harcamalarının gelir dağılımı üzerindeki etkisi: OECD ülkelerine yönelik panel veri analizi. Dokuz Eylül Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, 17(4), 493-516. https://doi.org/10.16953/deusbed.80724 google scholar
  • Kriegera, T., & Meierrieks, D. (2016). Political capitalism: The interaction between income inequality, economic freedom and democracy. European Journal of Political Economy, 45, 115-132. https:// doi.org/10.1016/j.ejpoleco.2016.10.005 google scholar
  • Meschi, E., & Vivarelli, M. (2009). Trade and income inequality in developing countries. World Development, 37(2), 287-302. https://doi.org/10.1016/j.worlddev.2008.06.002 google scholar
  • Muinelo-Gallo, L., & Roca-Sagales, O. (2013). Joint determinants of fiscal policy, income inequality and economic growth. Economic Modelling, 30, 814-824. https://doi.org/10.1016/j. econmod.2012.11.009 google scholar
  • Niehues, J. (2010). Social spending generosity and income inequality: A dynamic panel approach (IZA Discussion Paper No. 5178). Retrieved from IZA Institute of Labor Economics website: http://ftp. iza.org/dp5178.pdf google scholar
  • OECD (2020). Income inequality (indicator). doi: 10.1787/459aa7f1-en google scholar
  • OECD (2020). Social spending (indicator). doi: 10.1787/7497563b-en google scholar
  • OECD (2020). Trade in goods and services (indicator). doi: 10.1787/0fe445d9-en google scholar
  • Ospina M. (2010). The effect of social spending on income inequality: An analysis for Latin American countries (Documentos de Trabajo CIEF No. 010615). Retrieved from https://papers.ssrn.com/ sol3/papers.cfm?abstract_id=2427510 google scholar
  • Sanchez, A., & Perez-Corral, A. L. (2018). Government social expenditure and income inequalities in the European Union. Hacienda Pûblica Espanola / Review of Public Economics, 227, 133-156. https://doi.org/10.7866/HPE-RPE.18.4.5 google scholar
  • Ulu, M. İ. (2018). The effect of government social spending on income inequality in OECD: A panel data analysis. International Journal of Economics Politics Humanities and Social Sciences, 1(3), 184202. Retrieved from https://dergipark.org.tr/tr/download/article-file/554520 google scholar
  • Wooldridge, J. M. (2013). Introductory econometrics: A modern approach (5th ed.). Mason, OH: South-Western Cengage Learning. google scholar
  • World Bank (2020). Unemployment, total (% of total labor force) (national estimate) (indicator). Retrieved from https://data.worldbank.org/indicator/SL.UEM.TOTL.NE.ZS google scholar
There are 30 citations in total.

Details

Primary Language English
Subjects Business Administration
Journal Section Research Article
Authors

Can Verberi 0000-0003-4876-8564

Sema Yaşar 0000-0002-7056-9265

Publication Date July 16, 2021
Submission Date January 6, 2021
Published in Issue Year 2021 Volume: 71 Issue: 1

Cite

APA Verberi, C., & Yaşar, S. (2021). The Effects of Social Spending on Income Inequality in 30 OECD Countries. İstanbul İktisat Dergisi, 71(1), 39-57.
AMA Verberi C, Yaşar S. The Effects of Social Spending on Income Inequality in 30 OECD Countries. İstanbul İktisat Dergisi. July 2021;71(1):39-57.
Chicago Verberi, Can, and Sema Yaşar. “The Effects of Social Spending on Income Inequality in 30 OECD Countries”. İstanbul İktisat Dergisi 71, no. 1 (July 2021): 39-57.
EndNote Verberi C, Yaşar S (July 1, 2021) The Effects of Social Spending on Income Inequality in 30 OECD Countries. İstanbul İktisat Dergisi 71 1 39–57.
IEEE C. Verberi and S. Yaşar, “The Effects of Social Spending on Income Inequality in 30 OECD Countries”, İstanbul İktisat Dergisi, vol. 71, no. 1, pp. 39–57, 2021.
ISNAD Verberi, Can - Yaşar, Sema. “The Effects of Social Spending on Income Inequality in 30 OECD Countries”. İstanbul İktisat Dergisi 71/1 (July 2021), 39-57.
JAMA Verberi C, Yaşar S. The Effects of Social Spending on Income Inequality in 30 OECD Countries. İstanbul İktisat Dergisi. 2021;71:39–57.
MLA Verberi, Can and Sema Yaşar. “The Effects of Social Spending on Income Inequality in 30 OECD Countries”. İstanbul İktisat Dergisi, vol. 71, no. 1, 2021, pp. 39-57.
Vancouver Verberi C, Yaşar S. The Effects of Social Spending on Income Inequality in 30 OECD Countries. İstanbul İktisat Dergisi. 2021;71(1):39-57.