Inequality and public policy

From ProMarket:

Indeed, the analysis shows that the share of public expenditures in GDP has a negative, significant, and large effect on inequality. For a given level of inequality of market income, a rise of public expenditures by an additional percent of GDP reduces the Gini coefficient of disposable income by 0.35 percentage points. Since the size of public expenditures across the OECD countries varies from 35 to 55 percent of GDP, this variable can therefore explain variability of the Gini coefficient of 7 percentage points across these countries. The Gini of disposable income in the OECD countries varies from 0.25 to 0.4. Hence, changes in public intervention can explain half or even more of these differences.

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