Empirical Analysis of Public Expenditures and Income Inequality among Developing Economies
Résumé
Abstract Developing economies are not immune to the inequality challenges. Inequality is one of the critical challenges affecting the livelihood in developing economies and hinders their development paths. This paper investigates the World Bank development policies in achieving income inequality in selected developing economies. To achieve this objective, three types of regressions carried out for all three income groups; pooled OLS regression, random effect and fixed effect generalized least square GLS) regressions on panel data from 1980 to 2020. Findings revealed that wide-ranging World Bank initiatives in supporting low-income countries in promoting public expenditures on education, health and R&D are key factors to address the problems associated with income inequality. In addition, the study revealed that the debt service ratio, World Bank loan, international development assistance, and foreign direct investment have no significant power to reduce inequality within the analysed countries. Consequently, the study recommends authorities of developing countries be more cautious when applying for loans or aid and also have a serious evaluation before allowing foreign investors to start a business within their respective countries. JEL Classification: D63; F68; I24; P36
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