Impact of fiscal policy on interstate economic inequality
Anita Rani, Alka and Sumit Kumar
This paper investigates the effects of various fiscal policy instruments on economic growth and income inequality. Transfer payments or an income tax are examples of fiscal policy. The amount of development, income distribution, and degree of political franchise all influence fiscal policy. Political equilibrium endogenous growth models that handle distributional concerns provide reduced-form equations. Furthermore, the data show that government size, education spending, and health spending are all adversely related to wealth disparity only in developed nations. The global distribution of income was shown to be unaffected by public debt. For institutional capability, we discovered that corruption and government effectiveness had no substantial impact on income distribution in developed and developing nations. However, the coefficients of the interactions between fiscal policy and institutional capability, while minor in most situations, show the predicted signals. Some policy suggestions have been made.