Fiscal Policy and Income Inequality: The Critical Role of Institutional Capacity

Rising income inequality has become a defining global challenge that hinders the achievement of United Nations Sustainable Development Goals. The paper investigates effect fiscal policy and institutional capacity on among developed developing countries. Applying system Generalized Method Moments (GMM) to control potential endogeneity for countries from 2000 2019, following results have been established. dynamic captured by first lag suggests widening gap is persistent in both We also find evidence tax more progressive may abate not However, taxes goods services were found impact equalization globally. Furthermore, findings reveal government size, education expenditure, health expenditure are negatively associated with only. Public debt was observed influence distribution across world. corruption effectiveness do significantly capacity. most cases, coefficients interactions between bear expected signs, albeit insignificant. Some recommendations offered.