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Alternative Government Spending Rules: Effects On Income Inequality And Welfare

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  • Lim, G. C.
  • McNelis, Paul D.

Abstract

This paper compares the effects of pro- and countercyclical government spending on income inequality and welfare in a small open economy. We examine the consequences of alternative government spending rules following shocks to productivity, domestic interest rates, terms of trade, and export demand. The simulated results show that welfare and income inequality indices can move in opposite directions for government spending rules, with countercyclical spending improving welfare and procyclical spending improving income equality.

Suggested Citation

  • Lim, G. C. & McNelis, Paul D., 2013. "Alternative Government Spending Rules: Effects On Income Inequality And Welfare," Macroeconomic Dynamics, Cambridge University Press, vol. 17(7), pages 1496-1518, October.
    • Handle: RePEc:cup:macdyn:v:17:y:2013:i:07:p:1496-1518_00
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    Cited by:

    1. PAUL D. McNELIS & NAOYUKI YOSHINO, 2018. "Household Income Dynamics In A Lower-Income Small Open Economy: A Comparison Of Banking And Crowdfunding Regimes," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 63(01), pages 147-166, March.
    2. G. C. Lim & Paul D. McNelis, 2014. "Income Inequality, Trade and Financial Openness," Melbourne Institute Working Paper Series wp2014n07, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    3. Juan F. Guerra‐Salas, 2018. "Latin America'S Declining Skill Premium: A Macroeconomic Analysis," Economic Inquiry, Western Economic Association International, vol. 56(1), pages 620-636, January.
    4. Juan Guerra-Salas, 2016. "Fiscal Policy, Sectoral Allocation, and the Skill Premium: Explaining the Decline in Latin America’s Income Inequality," Working Papers Central Bank of Chile 779, Central Bank of Chile.

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