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Abdulaleem Isiaka (Virtual Seminar)
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Title: What is the redistributive impact of reallocating government spending? Evidence from a sample of middle-income countries
Abstract: This paper employs the fixed effects estimator in examining the redistributive impact of financing welfare programmes through cuts in other government spending components within a panel of 51 middle income countries over the period 2005–2015. Additionally, this study investigates how the percentile income shares of different income groups within the sample are affected by the spending reallocations towards welfare programmes. This study finds that the twin objective of reducing inequality and benefiting all income groups can be achieved if the right social welfare programme is financed by cuts in expenditure on infrastructure, agriculture and other sectors of the economy. However, no evidence is found to confirm that inequality reduces with reallocations from defence spending towards social welfare programmes. Upon splitting the sample by income levels, this paper finds that reallocations towards education spending are more crucial in upper middle income countries while spending reallocations towards social protection and health spending have greater relevance in lower middle income countries. Based on its findings, this paper recommends that policy makers in middle income countries give greater consideration to the redistributive prospects of spending reallocations towards social welfare programmes.