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Inequality and size of government: evidence from Brazilian states

Author

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  • Enlinson Mattos
  • Fabiana Rocha

Abstract

Purpose - This paper seeks to investigate the role of income‐inequality on the size of local government. Design/methodology/approach - First, the paper extends the model proposed by Meltzer and Richard, allowing for spatial interaction in the redistributive in‐kind transfers from the local governments. Second, it estimates the determinants of the size in local government taking into consideration spatial dependence in the variables. Findings - This model points that the poorer the median voter is, the higher should be the level of local public expenditures, but the spillover effect (spatial effect) in spending is undetermined. Second, using data on Brazilian states public finance, the results suggest a negative relation between expenditures (and tax revenues) and the median voter income, in favor to the model. While both public spending and tax rates exhibit negative spatial correlation (substitute goods), behavioral significance can be attached to the spatial process in public spending but not to the spatial process in the local tax rate. Originality/value - The paper provides a small extension of the Meltzer and Richard model allowing for spatial interaction and contributes to the empirical debate about inequality and the size of the government presenting the results for Brazil.

Suggested Citation

  • Enlinson Mattos & Fabiana Rocha, 2008. "Inequality and size of government: evidence from Brazilian states," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 35(4), pages 333-351, September.
    • Handle: RePEc:eme:jespps:v:35:y:2008:i:4:p:333-351
    DOI: 10.1108/01443580810895626
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    Citations

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    Cited by:

    1. Laudo M. Ogura, 2010. "Effects of Urban Growth Controls on Intercity Commuting," Urban Studies, Urban Studies Journal Limited, vol. 47(10), pages 2173-2193, September.
    2. Zhang, Wenxi & Wang, Bo & Wang, Jian & Wu, Qun & Wei, Yehua Dennis, 2022. "How does industrial agglomeration affect urban land use efficiency? A spatial analysis of Chinese cities," Land Use Policy, Elsevier, vol. 119(C).
    3. Christian Bredemeier, 2014. "Imperfect information and the Meltzer-Richard hypothesis," Public Choice, Springer, vol. 159(3), pages 561-576, June.
    4. Benoît LE MAUX & Kristýna DOSTÁLOVÁ & Fabio PADOVANO, 2017. "Ideology and Public Policies: A Quasi-Experimental Test of the Hypothesis that Left-Wing Governments Spend More," Economics Working Paper from Condorcet Center for political Economy at CREM-CNRS 2017-01-ccr, Condorcet Center for political Economy.
    5. Benoît Le Maux & Kristýna Dostálová & Fabio Padovano, 2020. "Ideology or voters? A quasi-experimental test of why left-wing governments spend more," Public Choice, Springer, vol. 182(1), pages 17-48, January.

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