6533b835fe1ef96bd129ebb6

RESEARCH PRODUCT

Financial Globalization, Fiscal Policies and the Distribution of Income

Pietro PizzutoJonathan D. OstryDavide FurceriPrakash Loungani

subject

Economics and Econometrics050208 financeInequalitymedia_common.quotation_subject05 social sciencesSettore SECS-P/02 Politica EconomicaMonetary economicsCapital account liberalizationFiscal policyDecileTop income sharesConsolidation (business)InequalityIncome distribution0502 economics and businessEconomics050207 economicsFinancial globalizationFiscal policyFinancial globalizationmedia_common

description

This paper provides evidence that financial globalization—liberalization of the capital account—makes income distribution more uneven by raising the share of income that goes to the richest income deciles. We also offer evidence that changes in domestic fiscal policies in the aftermath of financial globalization are one channel through which these distributional effects could occur. Specifically, we show that episodes of capital account liberalization are followed by greater fiscal consolidation and reduced fiscal redistribution, both of which lead to increased inequality.

yearjournalcountryeditionlanguage
2020-03-12Comparative Economic Studies
https://doi.org/10.1057/s41294-020-00113-4