IDEAS home Printed from https://ideas.repec.org/a/eee/quaeco/v54y2014i4p563-578.html
   My bibliography  Save this article

Personal and regional redistribution through public finance in a federal setting

Author

Listed:
  • Cont, Walter
  • Porto, Alberto

Abstract

Following a partial equilibrium approach, this paper studies the effect of fiscal policy on income distribution in Argentina, based on budget information corresponding to the year 2004. Specifically, it aims to provide an empirical answer to a set of questions related to the responsibility of different levels of government (national or provincial) in ensuring the equitable distribution of income; how this responsibility is accomplished in practice, when this function is shared among two or more levels of government; whether an incompatibility arises among the policies from different levels of government; and the effect of fiscal policy on personal and regional income distribution.The main results of the paper are summarized as follows. At the aggregate level, both national and provincial budgets have a redistributive impact on personal income distribution, through a combination of progressive expenditures and (slightly) regressive taxes. Regional redistribution depends on two fiscal tools: the national budget and the revenue sharing regime. The progressive effect of expenditures and taxes interacts with the geographical effect of the revenue-sharing and the national budget, reinforcing progressivity in net-receiving groups and creating a trade-off between progressivity and (negative) regional transfer in net-financing ones. Provincial budgets have more impact than the national budget, both being compatible in pursuing the redistributive goal.

Suggested Citation

  • Cont, Walter & Porto, Alberto, 2014. "Personal and regional redistribution through public finance in a federal setting," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(4), pages 563-578.
    • Handle: RePEc:eee:quaeco:v:54:y:2014:i:4:p:563-578
    DOI: 10.1016/j.qref.2012.10.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1062976912000683
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.qref.2012.10.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Richard Musgrave, 1996. "The role of the state in fiscal theory," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(3), pages 247-258, July.
    2. Alberto Porto & Atilio Elizagaray, 2011. "Regional Development, Regional Disparities and Public Policies in Argentina: A Long-run View," Chapters, in: Werner Baer & David Fleischer (ed.), The Economies of Argentina and Brazil, chapter 16, Edward Elgar Publishing.
    3. Alberto Porto & Pablo Sanguinetti, 2001. "Political Determinants of Intergovernmental Grants: Evidence From Argentina," Economics and Politics, Wiley Blackwell, vol. 13(3), pages 237-256, November.
    4. Timothy Goodspeed, 2002. "Bailouts in a Federation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(4), pages 409-421, August.
    5. Helm, Dieter, 1986. "The Assessment: The Economic Borders of the State," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 2(2), pages 1-1, Summer.
    6. Maurice Obstfeld & Giovanni Peri, 1998. "Regional non-adjustment and fiscal policy," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 13(26), pages 206-259.
    7. Pierfederico Asdrubali & Bent E. Sørensen & Oved Yosha, 1996. "Channels of Interstate Risk Sharing: United States 1963–1990," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(4), pages 1081-1110.
    8. Mr. Ke-young Chu & Mr. Hamid R Davoodi & Mr. Sanjeev Gupta, 2000. "Income Distribution and Tax and Government Social Spending Policies in Developing Countries," IMF Working Papers 2000/062, International Monetary Fund.
    9. Brown, Charles C. & Oates, Wallace E., 1987. "Assistance to the poor in a federal system," Journal of Public Economics, Elsevier, vol. 32(3), pages 307-330, April.
    10. Canzoneri,Matthew B. & Grilli,Vittorio & Masson,Paul R. (ed.), 1992. "Establishing a Central Bank," Cambridge Books, Cambridge University Press, number 9780521420983, January.
    11. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October.
    12. Brennan, Geoffrey & Buchanan, James M., 1977. "Towards a tax constitution for Leviathan," Journal of Public Economics, Elsevier, vol. 8(3), pages 255-273, December.
    13. Goñi, Edwin & Humberto López, J. & Servén, Luis, 2011. "Fiscal Redistribution and Income Inequality in Latin America," World Development, Elsevier, vol. 39(9), pages 1558-1569, September.
    14. Brennan, G. & Pincus, J. J., 1996. "A minimalist model of federal grants and flypaper effects," Journal of Public Economics, Elsevier, vol. 61(2), pages 229-246, August.
    15. Wallace Oates, 2005. "Toward A Second-Generation Theory of Fiscal Federalism," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(4), pages 349-373, August.
    16. Decressin, Jorg, 2002. "Regional income redistribution and risk sharing: how does Italy compare in Europe?," Journal of Public Economics, Elsevier, vol. 86(2), pages 287-306, November.
    17. Tresch, Richard W., 2014. "Public Finance," Elsevier Monographs, Elsevier, edition 3, number 9780124158344.
    18. Bayoumi, Tamim & Masson, Paul R., 1995. "Fiscal flows in the United States and Canada: Lessons for monetary union in Europe," European Economic Review, Elsevier, vol. 39(2), pages 253-274, February.
    19. Ricardo, David, 1821. "On the Principles of Political Economy and Taxation," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, edition 3, number ricardo1821.
    20. Aaron, Henry & McGuire, Martin, 1970. "Public Goods and Income Distribution," Econometrica, Econometric Society, vol. 38(6), pages 907-920, November.
    21. Bailey, Stephen J & Connolly, Stephen, 1998. "The Flypaper Effect: Identifying Areas for Further Research," Public Choice, Springer, vol. 95(3-4), pages 335-361, June.
    22. Chu, Ke-Young & Davoodi, Hamid & Gupta, Sanjeev, 2000. "Income Distribution and Tax, and Government Social Spending Policies in Developing Countries," WIDER Working Papers 295547, United Nations University, World Institute for Development Economic Research (UNU-WIDER).
    23. Leonardo Gasparini & Federico Gutiérrez & Leopoldo Tornarolli, 2007. "Growth And Income Poverty In Latin America And The Caribbean: Evidence From Household Surveys," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 53(2), pages 209-245, June.
    24. Fisher, Ronald C., 1982. "Income and grant effects on local expenditure: The flypaper effect and other difficulties," Journal of Urban Economics, Elsevier, vol. 12(3), pages 324-345, November.
    25. Chu, K.-y. & Davoodi, H. & Gupta, S., 2000. "Income Distribution and Tax, and Government Social Spending Policies in Developing Countries," Research Paper 214, World Institute for Development Economics Research.
    26. Giampaolo Arachi & Caterina Ferrario & Alberto Zanardi, 2010. "Regional Redistribution and Risk Sharing in Italy: The Role of Different Tiers of Government," Regional Studies, Taylor & Francis Journals, vol. 44(1), pages 55-69.
    27. Porto, Alberto & Sanguinetti, Pablo, 1993. "Descentralización fiscal en América Latina: el caso argentino," Series Históricas 9486, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    28. R. A. Musgrave & Tun Thin, 1948. "Income Tax Progression, 1929-48," Journal of Political Economy, University of Chicago Press, vol. 56(6), pages 498-498.
    29. Wildasin, David E, 1992. "Relaxation of Barriers to Factor Mobility and Income Redistribution," Public Finance = Finances publiques, , vol. 47(Supplemen), pages 216-230.
    30. Udo Ebert & Georg Tillmann, 2006. "Budget Incidence Reconsidered," Journal of Economics, Springer, vol. 88(1), pages 1-19, June.
    31. Fabio Padovano, 2007. "The Politics and Economics of Regional Transfers," Books, Edward Elgar Publishing, number 4058.
    32. Ke-Young Chu & Hamid Davoodi & Sanjeev Gupta, 2000. "Income Distribution and Tax, and Government Social Spending Policies in Developing Countries," WIDER Working Paper Series wp-2000-214, World Institute for Development Economic Research (UNU-WIDER).
    33. Dasgupta, Partha, 1986. "Positive Freedom, Markets and the Welfare State," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 2(2), pages 25-36, Summer.
    34. Dan Stegarescu, 2009. "The effects of economic and political integration on fiscal decentralization: evidence from OECD countries," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(2), pages 694-718, May.
    35. Dan Stegarescu, 2009. "The effects of economic and political integration on fiscal decentralization: evidence from OECD countries," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 694-718, May.
    36. Pauly, Mark V., 1973. "Income redistribution as a local public good," Journal of Public Economics, Elsevier, vol. 2(1), pages 35-58, February.
    37. Weingast, Barry R., 2009. "Second generation fiscal federalism: The implications of fiscal incentives," Journal of Urban Economics, Elsevier, vol. 65(3), pages 279-293, May.
    38. Jonathan A. Rodden & Gunnar S. Eskeland (ed.), 2003. "Fiscal Decentralization and the Challenge of Hard Budget Constraints," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262182297, December.
    39. repec:bla:jecsur:v:14:y:2000:i:3:p:337-58 is not listed on IDEAS
    40. Oates, Wallace E., 2008. "On the Evolution of Fiscal Federalism: Theory and Institutions," National Tax Journal, National Tax Association;National Tax Journal, vol. 61(2), pages 313-334, June.
    41. Brennan, Geoffrey & Buchanan, James M., 1978. "Tax instruments as constraints on the disposition of public revenues," Journal of Public Economics, Elsevier, vol. 9(3), pages 301-318, June.
    42. James R. Hines & Richard H. Thaler, 1995. "The Flypaper Effect," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 217-226, Fall.
    43. R. A. Musgrave, 1964. "Estimating The Distribution Of The Tax Burden," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 10(1), pages 186-219, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Walter Cont & Alberto Porto, 2015. "Fiscal Policy and Income Distribution. Argentina 1995 – 2010," CEFIP, Working Papers 016, CEFIP, Universidad Nacional de La Plata.
    2. Alberto Porto & Atilio Elizagaray, 2011. "Regional Development, Regional Disparities and Public Policies in Argentina: A Long-run View," Chapters, in: Werner Baer & David Fleischer (ed.), The Economies of Argentina and Brazil, chapter 16, Edward Elgar Publishing.
    3. -, 2017. "Fiscal Panorama of Latin America and the Caribbean 2017: Mobilizing resources to finance sustainable development," Libros y Documentos Institucionales, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 41047 edited by Eclac.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Caroline-Antonia Goerl & Mr. Mike Seiferling, 2014. "Income Inequality, Fiscal Decentralization and Transfer Dependency," IMF Working Papers 2014/064, International Monetary Fund.
    2. Giampaolo Arachi & Caterina Ferrario & Alberto Zanardi, 2010. "Regional Redistribution and Risk Sharing in Italy: The Role of Different Tiers of Government," Regional Studies, Taylor & Francis Journals, vol. 44(1), pages 55-69.
    3. Jorge Martinez-Vazquez, 2001. "The Impact of Budgets on the Poor: Tax and Benefit," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0110, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    4. Ferrario, Caterina & Zanardi, Alberto, 2011. "Fiscal decentralization in the Italian NHS: What happens to interregional redistribution?," Health Policy, Elsevier, vol. 100(1), pages 71-80, April.
    5. Becerra, Ligia Melo, 2004. "Intergovernmental fiscal relations : the Colombian case," Economics PhD Theses 0304, Department of Economics, University of Sussex Business School.
    6. Alberto Porto & Jorge Puig, 2021. "On the interaction between own revenues and intergovernmental transfers. Evidence from Argentinean local governments," CEFIP, Working Papers 041, CEFIP, Universidad Nacional de La Plata.
    7. Jorge Martinez-Vazquez, 2007. "Budget Policy and Income Distribution," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0707, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    8. Puig Jorge Pablo & Porto Alberto & Vidal Juan Bautista, 2024. "Intergovernmental transfers and dynamic adjustment of subnational budgets," Asociación Argentina de Economía Política: Working Papers 4754, Asociación Argentina de Economía Política.
    9. Kyriacou, Andreas & Muinelo-Gallo, Leonel & Roca-Sagalés, Oriol, 2015. "On the redistributive efficiency of fiscal policy," MPRA Paper 63276, University Library of Munich, Germany.
    10. Giannola, Adriano & Petraglia, Carmelo & Scalera, Domenico, 2016. "Net fiscal flows and interregional redistribution in Italy: A long-run perspective (1951–2010)," Structural Change and Economic Dynamics, Elsevier, vol. 39(C), pages 1-16.
    11. Wu, Alfred M. & Wang, Wen, 2013. "Determinants of Expenditure Decentralization: Evidence from China," World Development, Elsevier, vol. 46(C), pages 176-184.
    12. Oto-Peralías, Daniel & Romero-Ávila, Diego & Usabiaga, Carlos, 2013. "Does fiscal decentralization mitigate the adverse effects of corruption on public deficits?," European Journal of Political Economy, Elsevier, vol. 32(C), pages 205-231.
    13. Edward Anderson & Maria Ana Jalles D'Orey & Maren Duvendack & Lucio Esposito, 2017. "Does Government Spending Affect Income Inequality? A Meta-Regression Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 31(4), pages 961-987, September.
    14. Juan Marroquín-Arreola & Humberto Ríos Bolívar, 2021. "Decisiones fiscales, crecimiento económico y desigualdad del ingreso," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 16(4), pages 1-16, Octubre -.
    15. Padovano, Fabio, 2012. "The drivers of interregional policy choices: Evidence from Italy," European Journal of Political Economy, Elsevier, vol. 28(3), pages 324-340.
    16. Hernandez-Trillo, Fausto, 2016. "Poverty Alleviation in Federal Systems: The Case of México," World Development, Elsevier, vol. 87(C), pages 204-214.
    17. Herwig Immervoll & Horacio Levy & José Ricardo Nogueira & Cathal O´Donoghue & Rozane Bezerra de Siqueira, 2005. "The Impact of Brazil´s Tax-Benefit System on Inequality and Poverty," Ibero America Institute for Econ. Research (IAI) Discussion Papers 117, Ibero-America Institute for Economic Research.
    18. Marina Dodlova & Anna Gioblas, 2017. "Regime type, inequality, and redistributive transfers in developing countries," WIDER Working Paper Series wp-2017-30, World Institute for Development Economic Research (UNU-WIDER).
    19. Bouton, Laurent & Gassner, Marjorie & Verardi, Vincenzo, 2008. "Redistributing income under fiscal vertical imbalance," European Journal of Political Economy, Elsevier, vol. 24(2), pages 317-328, June.
    20. Kalle Hirvonen & Giulia Mascagni & Keetie Roelen, 2018. "Linking taxation and social protection: Evidence on redistribution and poverty reduction in Ethiopia," International Social Security Review, John Wiley & Sons, vol. 71(1), pages 3-24, January.

    More about this item

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:quaeco:v:54:y:2014:i:4:p:563-578. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620167 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.