Does Government Spending Affect Income Inequality? A Meta‐regression Analysis

Abstract In this paper findings of a meta‐regression analysis are presented exploring the effects of government spending on income inequality, with a particular focus on low‐ and middle‐income countries. We identify a total of 84 separate studies containing over 900 estimates of the effect of one or more measures of spending on one or more measures of income inequality. The results show some evidence of a moderate negative relationship between government spending and income inequality, which is strongest for social welfare and other social spending, and when using the Gini coefficient or the top income share as the measure of inequality. However, both the size and direction of the estimated relationship between government spending and income inequality is affected by a range of other factors, including the control variables and estimation method used. We also find evidence of publication bias, in that negative estimates of the relationship appear to be under‐reported in the literature.