September 11, 2019. “Income Inequality and the Size of Government in Europe” is the GLO Discussion Paper of the Month in August.

The GLO Discussion Paper of the Month of August finds that government redistribution through expenditures is a useful tool capable of reducing net income inequality, and even more effectively than has been predicted by previous studies.   

GLO Discussion Papers are research and policy papers of the GLO Network which are widely circulated to encourage discussion. Provided in cooperation with EconStor, a service of the ZBW – Leibniz Information Centre for Economics, GLO Discussion Papers are among others listed in RePEc (see IDEAS, EconPapers)Complete list of all GLO DPs downloadable for free.

GLO Discussion Paper of the Month: August

GLO Discussion Paper No. 381, 2019

Income Inequality and the Size of Government: A Causal Analysis – Download PDF
by Guzi, Martin & Kahanec, Martin  

GLO Fellows Martin Guzi & Martin Kahanec 

Author Abstract:  Expansion of the public sector and redistributive policies may reduce income inequality, but formal tests suffer from the problem of endogeneity of government size with respect to the distribution of income. Studying 30 European countries over the period 2004-2015, we apply instrumental variable estimation techniques to identify a causal relationship between income inequality and government size, measured as the government expenditure share in GDP. Using a novel instrument – the number of political parties in the ruling coalition – we find that accounting for the possible endogeneity of government size increases the magnitude of the estimated negative effects. Our findings thus suggest that much of the literature underestimates the true role of the government in attenuating income inequality. The estimated relationship between income inequality and government size persists in a series of robustness checks.

GLO Discussion Papers of August 2019

391 Turkish University Students’ Self-Perceptions of Aging: An Analysis Over Socio-Economic Dimensions – Download PDF
by Yumurtaci, Aynur & Bagis, Bilal

390 The Impact of Exposure to Missionaries on the English Language Proficiency and Earnings of Immigrants in the USA – Download PDF
by Larsen, Nicholas & Chiswick, Barry R.

389 On the road to integration? Immigrant’s demand for informal (& formal) education – Download PDF
by Coniglio, Nicola D. & Hoxhaj, Rezart & Jayet, Hubert

388 Divorce among European and Mexican Immigrants in the U.S – Download PDF
by Chiswick, Barry R. & Houseworth, Christina A

387 A Simple Solution to the Problem of Independence of Irrelevant Alternatives in Choo and Siow Marriage Market Model  Download PDF
by Gutierrez, Federico H.

386 The diversity of household assets holdings in the United States in 2007 and 2009: Measurement and determinants – Download PDF
by Sierminska, Eva M. & Silber, Jacques

385 The Impact of BMI on Mental Health: Further Evidence from Genetic Markers – Download PDF
by Amin, Vikesh & Flores, Carlos A. & Flores-Lagunes, Alfonso

384 Smartphone Use and Academic Performance: Correlation or Causal Relationship? – Download PDF
by Baert, Stijn & Vujić, Sunčica & Amez, Simon & Claeskens, Matteo & Daman, Thomas & Maeckelberghe, Arno & Omey, Eddy & De Marez, Lieven

383 The long-term effect of migration on economic inequality between EU Member States – Download PDF
by Ulceluse, Magdalena

382 Extreme Temperature and Extreme Violence across Age and Gender: Evidence from Russia  Download PDF
by Popova, Olga & Otrachshenko, Vladimir & Tavares, José

381 Income Inequality and the Size of Government: A Causal Analysis – Download PDF
by Guzi, Martin & Kahanec, Martin

380 The Yen Exchange Rate and the Hollowing Out of the Japanese Industry – Download PDF
by Belke, Ansgar & Volz, Ulrich

379 The effectiveness of restrictive immigration policies: the case of transitional arrangements  Download PDF
by Ulceluse, Magdalena & Kahanec, Martin

378 Foreign aid, bilateral asylum immigration and development – Download PDF
by Murat, Marina

377 Interest Rate Hysteresis in Macroeconomic Investment under Uncertainty – Download PDF
by Belke, Ansgar & Göcke, Matthias

376 Skill Gap, Mismatch, and the Dynamics of Italian Companies’ Productivity  Download PDF
by Fanti, Lucrezia & Guarascio, Dario & Tubiana, Matteo

375 Migration. Comparing political and cultural visions – Download PDF
by Bruni, Michele & Catani, Mario

374 Interest Rate Bands of Inaction and Play-Hysteresis in Domestic Investment – Evidence for the Euro Area – Download PDF
by Belke, Ansgar & Frenzel Baudisch, Coletta & Göcke, Matthias

373 Gender division of household labor: How does culture operate?  Download PDF
by Marcén, Miriam & Morales, Marina

372 Labor market policy and subjective well-being during the Great Recession  Download PDF
by Morgan, Robson & O’Connor, Kelsey J.

Senior Editors: Matloob Piracha (University of Kent) & GLO; Klaus F. Zimmermann (UNU-MERIT, Maastricht University and Bonn University).
Managing Editor: Magdalena Ulceluse, University of  


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