Does government spending reduce inequality? An important question, with two very different answers, and a surprising but temporary agreement. On the one hand, based on a multi-country study, researchers argue that the results for South Africa show that government spending is ‘strongly progressive’. On the other hand, Patrick Bond has argued that the research ignores large areas of government spending and taxation that may significantly increase inequality. at face value, the disagreements are deep. However, both sets of arguments are premised on a common understanding that inequality remains exceptionally high in South Africa. But, the agreement is temporary, because different strategies to reduce inequality are proposed.
The links to the two articles are below:
How much is inequality reduced by progressive taxation and government spending? by Ingrid Woolard, Rebecca Metz, Gabriela Inchauste, Nora Lustig, Mashekwa Maboshe, Catriona Purfield.
Do government spending and taxation really reduce inequality, or do we need more thorough measurements? A response to the World Bank researchers by Patrick Bond.