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Government consumption in the DINA framework: allocation methods and consequences for post-tax income inequality

Author

Listed:
  • Lukas Riedel

    (ZEW Mannheim)

  • Holger Stichnoth

    (ZEW Mannheim
    University of Strasbourg
    IZA Bonn
    ZEW Mannheim)

Abstract

About half of government expenditure in the United States takes the form of government consumption (e.g., education, defense, infrastructure). In many studies of post-tax inequality based on the Dina framework (including the influential study by Piketty et al. (Q J Econ 133(2):553–609, 2018), government consumption is allocated either proportionally to post-tax disposable income or on a per-capita basis, and the level of inequality is fairly sensitive to this choice. This paper provides direct evidence on how public education spending (a substantial part of government consumption) is actually distributed. An allocation proportional to post-tax disposable income is clearly rejected, while a lump-sum allocation is found to provide a good approximation.

Suggested Citation

  • Lukas Riedel & Holger Stichnoth, 2024. "Government consumption in the DINA framework: allocation methods and consequences for post-tax income inequality," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(3), pages 736-779, June.
    • Handle: RePEc:kap:itaxpf:v:31:y:2024:i:3:d:10.1007_s10797-024-09832-1
    DOI: 10.1007/s10797-024-09832-1
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    More about this item

    Keywords

    Inequality; Redistribution; Education; In-kind transfers;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality

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