Top Income Shares and Budget Deficits

23 Pages Posted: 2 Aug 2012 Last revised: 3 Mar 2014

See all articles by Santo Milasi

Santo Milasi

University of Rome Tor Vergata

Date Written: January 2013

Abstract

During the last thirty years most OECD countries have accumulated large public debts. The same period has been characterized by a considerable increase in the concentration of income at the top of the distribution and by substantial cuts to taxation imposed on high incomes. The paper argues that the concentration of income at the top, along with the decreasing taxation imposed on top incomes, may have affected OECD countries' fiscal performances in recent decades. Using a panel of 17 OECD countries between 1975 and 2005, the paper presents the first reported evidence of a positive relationship between the top 1 percent income share and budget deficits. Moreover, the disaggregated analysis of the budget components suggests that such result is due to a negative relationship between concentration of income at the top and budget revenues.

Keywords: Budget Deficits, Budget Revenues, Income Inequality, Top Income Shares, Top Marginal Tax Rates

JEL Classification: D31, E62, H20, H62

Suggested Citation

Milasi, Santo, Top Income Shares and Budget Deficits (January 2013). CEIS Working Paper No. 249, Available at SSRN: https://ssrn.com/abstract=2121344 or http://dx.doi.org/10.2139/ssrn.2121344

Santo Milasi (Contact Author)

University of Rome Tor Vergata ( email )

Via di Tor Vergata
Rome, Lazio 00133
Italy

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