International Tax and Public Finance

, Volume 24, Issue 3, pp 484–511 | Cite as

Income inequality, fiscal stimuli and political (in)stability

  • Luca Agnello
  • Vitor Castro
  • João Tovar Jalles
  • Ricardo M. Sousa


Using data for a large panel of countries, this paper investigates the role played by income inequality and fiscal stimuli episodes in shaping the likelihood of political stability. By means of Tobit estimations, we show that a rise in inequality increases the probability of government crises. However, such adverse distributional effect is reduced when expansionary or increasingly expansionary fiscal stimuli episodes or successful fiscal stimuli programs are put in place.


Income distribution Fiscal stimuli Expansionary policies Political environment Institutional quality Tobit regression 

JEL Classification

H63 G01 G15 



Castro and Sousa acknowledge that this work has been financed by Operational Programme for Competitiveness Factors—COMPETE and by National Funds through the FCT—Portuguese Foundation for Science and Technology within the remit of the project “FCOMP-01-0124-FEDER-037268 (PEst-C/EGE/UI3182/2013)”. Castro also wishes to thank the financial support provided by the Portuguese Foundation for Science and Technology under the research grant SFRH/BSAB/113588/2015 (partially funded by COMPETE, QREN and FEDER). The authors thank the editor, Kimberley Scharf, and two anonymous referees for helpful comments and suggestions.


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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  • Luca Agnello
    • 1
  • Vitor Castro
    • 2
    • 3
  • João Tovar Jalles
    • 4
  • Ricardo M. Sousa
    • 5
    • 6
  1. 1.Department of Economics, Business and Statistics (SEAS)University of PalermoPalermoItaly
  2. 2.Faculty of EconomicsUniversity of CoimbraCoimbraPortugal
  3. 3.Economic Policies Research Unit (NIPE)University of MinhoBragaPortugal
  4. 4.Nova School of Business and EconomicsCentre for Globalization and GovernanceLisbonPortugal
  5. 5.Department of Economics and Economic Policies Research Unit (NIPE)University of MinhoBragaPortugal
  6. 6.LSE Alumni AssociationLondon School of Economics and Political ScienceLondonUK

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