scholarly journals The Impact of Fiscal Policy on Income Inequality: A Case Study of Pakistan

2021 ◽  
Vol 26 (1) ◽  
pp. 57-84
Author(s):  
Suhrab Khan ◽  
Ihtsham ul Haq Padda
Keyword(s):  
Fiscal Policy ◽  
Income Inequality ◽  
Policy Instruments ◽  
Income Redistribution ◽  
Annual Data ◽  
Tax Base ◽  
Distributed Lag ◽  
Long Run ◽  
Indirect Taxes ◽  
The Impact

This study investigates the impact of various fiscal policy instruments on the income inequality of Pakistan using an Auto Regressive Distributed Lag (ARDL) model on annual data. We find that direct taxes reduce income inequality, measured using the Gini index, while indirect taxes increase disparities. As the major portion of tax revenues are indirect taxes, the current tax regime of Pakistan does not achieve income redistribution. Similarly, development expenditures have significantly reduced income inequality, likely through the creation of employment opportunities. On the other hand, the overall fiscal deficit increases income inequality, due to a rising public debt financed by (regressive) indirect taxes. This study suggests that in the case of Pakistan, where direct taxes are low, a large shadow economy exists, and weak tax administration prevails, an increase in development expenditures and broadening of the tax base of direct taxes should be the main fiscal policy tools for income redistribution. Moreover, persistent high fiscal deficits in the long run should be avoided. Finally, governments should reduce educational inequalities and promote democratic values in the country in order to promote greater fairness in distribution of income.

scholarly journals Are some taxes better for growth in Pakistan? A time series analysis

2018 ◽  
Vol 45 (10) ◽  
pp. 1439-1452 ◽  
Author(s):  
Kashif Munir ◽  
Maryam Sultan
Keyword(s):  
Economic Growth ◽  
Time Series ◽  
International Trade ◽  
Sales Tax ◽  
Tax Base ◽  
Content Type ◽  
Long Run ◽  
Indirect Taxes ◽  
Short Run ◽  
The Impact

Purpose The purpose of this paper is to analyze the impact of taxes on economic growth in the long run as well as in the short run. Design/methodology/approach The study uses simple time series model, where real GDP is dependent variable and different forms of taxes are explanatory variables under ARDL framework from 1976 to 2014 at annual frequency for Pakistan. Findings Direct taxes have positive relation with economic growth in the long run. Sales tax, tax on international trade (tariffs) and other indirect taxes have positive impact on economic growth of Pakistan in the long run as well as in the short run. However, sales tax and other indirect taxes impact negatively on economic growth in the short run after one year because people realize decline in their real income. Practical implications Government should increase direct taxes by increasing tax base. Indirect taxes usually indicate negative impact after one and two years; therefore, government should decrease its reliance on indirect taxes. Government should promote tax awareness among the people which increase the tax morale of people and increase the tax base. Originality/value Taxes are disaggregated into direct and indirect taxes, while indirect taxes have been further disaggregated into excise duty, sales tax, surcharges, tax on international trade and other indirect taxes. This study provides useful insight for policy makers in designing taxes and their effect on growth.

Income inequality and CO2 emissions: Empirical evidence from Turkey

2018 ◽  
Vol 30 (3) ◽  
pp. 444-461 ◽  
Author(s):  
Caner Demir ◽  
Raif Cergibozan ◽  
Adem Gök
Keyword(s):  
Income Inequality ◽  
Environmental Degradation ◽  
Environmental Quality ◽  
Environmental Kuznets Curve ◽  
Kuznets Curve ◽  
Aggregate Consumption ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
The Impact

The aim of the study is to investigate the impact of income inequality on environmental quality in Turkey within the Environmental Kuznets Curve framework. In order to observe the short-run and long-run effects of income inequality on environmental quality, an autoregressive distributed lag bounds test on CO2 emission has been employed for the period 1963–2011 of Turkey. The results of the analysis reveal that there is a negative association between CO2 emission level and income inequality, which implies that increasing income inequality reduces environmental degradation in Turkey. Hence, a greater inequality in the society leads to less aggregate consumption in the economy due to lower propensity to emit in the richer households resulting in better environmental quality. The findings confirm an argument in the existing literature, which suggests that for developing countries, until a certain level of development, environmental degradation increases as income inequality in the society decreases. The results also confirm the Environmental Kuznets Curve hypothesis.

Does Nominal Devaluation Improve Income Distribution? Evidence from Bangladesh

2012 ◽  
Vol 19 (1) ◽  
pp. 61-77
Author(s):  
Muhammad Shahbaz ◽  
Mohammad Mafizur Rahman
Keyword(s):  
Income Inequality ◽  
Income Distribution ◽  
Trade Openness ◽  
Bounds Testing ◽  
Correction Model ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
Auto Regressive ◽  
The Impact

The article aims to investigate the impact of nominal devaluation on income distribution in Bangladesh both in short and long runs. In doing so, Auto Regressive Distributed Lag (ARDL) bounds testing has been employed for cointegration, and Error Correction Model (ECM) has been used for short-run dynamics. The empirical psychology has confirmed the existence of long-run relationship between the variables. Furthermore our estimated results reveal that nominal devaluation tends to decrease income inequality. Though economic growth appears to improve income distribution, non-linear link between both the variables, however, depicts Kuznets’ inverted-U curve (1955). Financial development causes further deterioration in income distribution. Trade openness contributes to income inequality as discussed in Leontief Paradox.

Globalisation, Economic Growth and Income Inequality in Nigeria

2020 ◽  
Vol 14 (2) ◽  
pp. 202-212
Author(s):  
NWOSA Philip Ifeakachukwu
Keyword(s):  
Economic Growth ◽  
Income Inequality ◽  
Secondary Data ◽  
Vector Error Correction ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
Auto Regressive ◽  
The Impact ◽  
Financial Globalisation

This article examines the link between globalisation, economic growth and income inequality in Nigeria using annual secondary data over the period 1981–2018. Specifically, it attempts to examine the following questions: (a) What is the direction of causation among globalisation, economic growth and inequality? (b) What is the impact of globalisation and economic growth on inequality? (iii) Do trade globalisation and financial globalisation have differential impacts on inequality in Nigeria? The article used both vector error correction modelling (VECM) and auto-regressive distributed lag (ARDL) techniques. The VECM results show a unidirectional causality from inequality and globalisation to economic growth in the long run, whereas a unidirectional causation was observed from inequality to economic growth in the short run. The ARDL estimate shows that globalisation and economic growth are significant determinants of inequality in Nigeria. Furthermore, it is observed that trade and financial globalisation influenced income inequality differently. In the light of these findings, the article recommends that the foreign direct investment should be channelled towards empowering the poor, and the dividends of economic growth should be evenly distributed to reduce the income inequality gap.

scholarly journals Impact of Monetary Policy Uncertainty and Fiscal Policy Uncertainty on CO2 Emissions in the Us

2020 ◽  
Author(s):  
Khalid Anser ◽  
Qasim Syed ◽  
Noreen Khalid ◽  
Jamshid Ali Turi ◽  
Juned Ali Shah
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Environmental Degradation ◽  
Carbon Emissions ◽  
Annual Data ◽  
Policy Uncertainty ◽  
Policy Makers ◽  
Long Run ◽  
Short Run ◽  
The Impact

Abstract Nowadays, environmental degradation is perceived as one of the serious concerns across the globe. One of the prime reasons behind environmental degradation is CO2 emissions. Therefore, researchers are actively putting their efforts to explore the determinants of CO2 emissions to mitigate CO2 emissions. On this basis, the present study contributes to the existing literature by investigating the impact of monetary policy uncertainty (MPU) and fiscal policy uncertainty (FPU) on CO2 emissions (environmental degradation). The current study employs ARDL methodology and uses annual data ranging from 1985 to 2019 for US. The results from the ARDL model report that there is an existence of long-run relationship among the variables. Moreover, MPU escalates the carbon emissions in both short-run and long-run. This implies that increase in MPU is responsible for rise in environmental degradation. On the contrary, FPU plunges the carbon emissions in both short- and long-run. This indicates that increase in FPU decreases the environmental degradation. Findings from the current study propose that policy makers should introduce reforms and launch policies to shrink MPU. Next, this study proposes that rule should be adopted as monetary policy making framework in lieu of discretion. Furthermore, the current study recommends that FPU should not be utilized as a tool to mitigate environmental degradation, because FPU has severe economic impacts.

scholarly journals Does Fiscal Policy stimulate Economic Growth in Ethiopia? An ARDL Approach

2021 ◽  
Author(s):  
Solomon Tilahun Mengistu
Keyword(s):  
Economic Growth ◽  
Fiscal Policy ◽  
Public Investment ◽  
Government Expenditure ◽  
Private Investment ◽  
Future Research ◽  
Tax Revenue ◽  
Annual Data ◽  
Distributed Lag ◽  
Long Run

Abstract Abstract In recent years, a vast literature has appeared on the relationship between fiscal policy and long-run economic growth. With the aim of give an overview of the recent discussion and establish a point of departure for future research, this study used time series techniques and used empirical model by Kneller et al (1999) and Bleaney et al (2000) to investigate the link between various components of fiscal policy on Ethiopia’s economic growth on annual data for the period 1985/86 – 2019. It employed the autoregressive distributed lag estimation technique. Results from the bound tests showed that there was a long-run relationship between the variables. Disaggregating government expenditure into productive and unproductive and tax revenue into distortionary and non-distortionary, this study found unproductive expenditure and non-distortionary tax revenue to be neutral to growth as predicted by economic theory. Moreover, productive expenditure has positive effect on growth while there was evidence of distortionary effects on growth of distortionary taxes. These results give right signal to policy makers in Ethiopia in formulating expenditure and tax policies to ensure unproductive expenditures are reduced while at the same time boosting public investment. Furthermore, there is need to encourage private investment in the country.

scholarly journals Robin Hood versus Piggy Bank: Income redistribution in Portugal 2006-2010

2014 ◽  
Vol 61 (5) ◽  
pp. 617-630 ◽  
Author(s):  
Carlos Rodrigues ◽  
Isabel Andrade
Keyword(s):  
Fiscal Policy ◽  
Welfare State ◽  
Economic Crisis ◽  
Policy Instruments ◽  
Income Redistribution ◽  
Income Taxes ◽  
Robin Hood ◽  
Cost Efficient ◽  
The Impact ◽  
Redistributive Effect

The redistributive effect of the Portuguese welfare state through pensions, benefits and income taxes is investigated in detail over the 2006- 2010 period using disposable income as benchmark. All social and fiscal policy instruments analysed contribute significantly to the reduction in inequality and poverty, with benefits other than pensions being the most cost-efficient. However, the impact of the economic crisis and austerity policies implemented from 2010 has reversed the previous trends and affected negatively the efficacy and efficiency of all instruments.

scholarly journals The Impact of Foreign Direct Investment on the Utilisation of Natural Resources in Nigeria

2018 ◽  
Vol 8 (2) ◽  
pp. 433-454
Author(s):  
Susan Nwadinachi Akinwalere
Keyword(s):  
Natural Resources ◽  
Resource Curse ◽  
Testing Procedure ◽  
Point Of View ◽  
Annual Data ◽  
Bounds Testing ◽  
Distributed Lag ◽  
Industrial Sectors ◽  
Long Run ◽  
The Impact

The purpose of this article is to examine the impact of FDI on the utilization of natural resources in Nigeria. This article uses annual data from 1970 to 2015 and employs the Autoregressive Distributed Lag (ARDL) bounds testing approach to cointegration, a testing procedure for level relationships developed by Pesaran and Shin (1999) and Pesaran et al. (2001). The ARDL cointegration approach examines the long-run relationship between FDI and natural resources on one hand and GDP on the other hand. The empirical results indicate that aggregate FDI has a positive and statistically significant impact on both natural resources and GDP in Nigeria. The ‘OIL’ variable presents a positive coefficient while GDP presents a negative estimated coefficient. From a policy point of view, countries such as Nigeria, endowed with natural resources, should pursue policies targeted at full deregulation (privatisation) of their natural resource sector to better utilise the abundance of their natural resources and attract additional FDI. Regarding GDP, there should be concerted efforts to boost the performance of the non-oil sector in Nigeria through more investments in the agricultural and industrial sectors which will make the growth of the economy spread across other sectors and, in turn, encourage national economic growth and development, reducing the possibility of the ‘resource curse’. This is the first paper that employs ARDL in determining the impact of FDI on the utilization of natural resources in Nigeria.

scholarly journals Islamic Philanthropy and Poverty Reduction in Indonesia: The Role of Integrated Islamic Social and Commercial Finance Institutions

2021 ◽  
Vol 16 (2) ◽  
pp. 274-301
Author(s):  
Azwar Iskandar ◽  
Bayu Taufiq Possumah ◽  
Khaerul Aqbar ◽  
Akhmad Hanafi Dain Yunta
Keyword(s):  
Financial Stability ◽  
Poverty Reduction ◽  
Annual Data ◽  
Economic Problems ◽  
Distributed Lag ◽  
Long Run ◽  
Auto Regressive ◽  
The Impact ◽  
Commercial Finance

The recent studies about the role of Islamic philanthropy in addressing socio-economic problems have been growing and confirming its significant role in overcoming the problem. This is in line with the existence of regulations that support the effectiveness of its role in poverty reduction in Indonesia, such as Law No. 23 of 2011 on Zakat Management and Law No. 41 of 2004 on Waqf. This study has two objectives. First, to analyze the impact of Islamic philanthropy on poverty reduction as the socio-economic problems in Indonesia in the short and long run. Second, to analyze the effectiveness of integrated Islamic commercial and social-economic or finance to address the poverty compared to unintegrated one. This study used Auto-Regressive Distributed Lag (ARDL) approach to analyze annual data for the period of 2002-2019 while investigating the long and short-run relationships among variables. It found that Islamic philanthropy reduces poverty both in the short and long run, particularly in the integration of Islamic social and commercial finance in a single model. The government should therefore include Islamic philanthropy or other Islamic social finances as a fundamental strategy for building financial stability and sustainable development. (Menjamurnya studi-studi terbaru terkait peran filantropi Islam dalam mengatasi masalah sosial-ekonomi telah mengkonfirmasi peran pentingnya dalam mengatasi masalah ini.  Hal ini sejalan dengan adanya regulasi yang mendukung efektivitas perannya dalam pengentasan kemiskinan di Indonesia, seperti Undang-Undang Nomor 23 Tahun 2011 tentang Pengelolaan Zakat dan Undang-Undang Nomor 41 Tahun 2004 tentang Wakaf. Penelitian ini memiliki dua tujuan. Pertama, untuk menganalisis dampak filantropi Islam terhadap penurunan tingkat kemiskinan sebagai sebuah permasalahan sosial-ekonomi di Indonesia, baik dalam jangka pendek maupun jangka panjang. Kedua, untuk menganalisis efektifitas integrasi atau antara filantropi dan komersial dalam kerangka ekonomi Islam dalam mengatasi permasalahan kemiskinan. Penelitian ini menggunakan pendekatan Auto-Regressive Distributed Lag (ARDL) untuk menginvestigasi hubungan jangka pendek dan jangka panjang antara filantropi Islam dan tingkat kemiskinan selama periode tahun 2002-2019. Penelitian ini menemukan bahwa filantropi Islam dapat menurunkan tingkat kemiskinan baik dalam jangka pendek maupun jangka panjang. Penelitian ini juga menemukan bahwa ketika filantropi dan komersial dalam kerangka ekonomi Islam diintegrasikan, tingkat kemiskinan dapat diturunkan baik dalam jangka pendek maupun jangka panjang. Pemerintah seyogiyanya menempatkan filantropi Islam sebagai kebijakan dan strategi fundamental dalam rangka mewujudkan stabilitas keuangan dan pembangunan berkelanjutan.)

scholarly journals Asymmetric Impact of Inflation and Unemployment on Income Inequality: The Case of Turkey

2019 ◽  
Author(s):  
Duygu Serin Oktay
Keyword(s):  
Economic Growth ◽  
Income Inequality ◽  
Full Employment ◽  
Economic Problem ◽  
Annual Data ◽  
Role Of Government ◽  
Distributed Lag ◽  
Asymmetric Impact ◽  
The Government ◽  
The Impact

Income inequality is a major economic problem for all developed or developing countries. Income inequality can be international, or among different regions within the country, even among individuals. Turkey is also known to be confronted with this problem and possible to see differences in income between different regions. Therefore, understanding income inequality and reasons that lie behind the problem became the primary research interests of the literature. In macroeconomic perspective, unemployment and inflation are two interconnected economic variables that may affect income inequality. Many of the researchers have tried to examine the impact of inflation and unemployment on income inequality and analyzed the role of government in controlling inflation, unemployment, and income. Certainly, parts of the macroeconomic aims which the government struggles to accomplish the economic growth, full employment, and stable domestic price level. These aims are pursued in order to advance mass welfare. Therefore, the purpose of this study is to contribute to the literature using the asymmetric model to examine the impact of inflation and unemployment on income inequality in Turkey utilizing annual data. In order to examine this impact, Nonlinear Autoregressive Distributed Lag(NARDL) model was used to analyze the nonlinear relationships between variables. It is investigated the asymmetric relationship between the variables and estimated short and long term coefficients. Accordingly, the light of the conclusion of the current study should introduce new ideas to policymakers which promote economic growth and development in the country so that income inequality can be reduced.

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