Inequality and size of government: evidence from Brazilian states

Enlinson Mattos (Getulio Vargas Foundation, Sao Paulo School of Economics and CEPESP, Sao Paulo, Brazil)
Fabiana Rocha (University of São Paulo and CEPESP, Sao Paulo, Brazil)

Journal of Economic Studies

ISSN: 0144-3585

Publication date: 5 September 2008

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.

Keywords

Citation

Mattos, E. and Rocha, F. (2008), "Inequality and size of government: evidence from Brazilian states", Journal of Economic Studies, Vol. 35 No. 4, pp. 333-351. https://doi.org/10.1108/01443580810895626

Download as .RIS

Publisher

:

Emerald Group Publishing Limited

Copyright © 2008, Emerald Group Publishing Limited

To read the full version of this content please select one of the options below

You may be able to access this content by logging in via Shibboleth, Open Athens or with your Emerald account.
To rent this content from Deepdyve, please click the button.
If you think you should have access to this content, click the button to contact our support team.