FISCAL GOVERNANCE AND INCOME INEQUALITY: EVIDENCE FROM MOROCCO

Abstract

This study examines the relationship between fiscal governance and income inequality in Morocco over the period 2000–2022. Using time-series data from national and international sources, the analysis explores how taxation structure, public expenditure, and macroeconomic conditions influence redistributive outcomes. The empirical approach combines Ordinary Least Squares (OLS), Instrumental Variables (IV) regression, and Autoregressive Distributed Lag (ARDL) models to capture both short-run dynamics and long-run relationships between fiscal policy variables and the Gini Index.

The results show that indirect taxation has a significant positive effect on income inequality, highlighting the regressive nature of consumption-based taxes within Morocco’s fiscal system. In contrast, government expenditure on education contributes to reducing inequality, indicating that targeted social spending can promote more inclusive economic outcomes. The findings also reveal that persistent fiscal deficits, averaging approximately −3.7% of GDP during the study period, have limited redistributive impact.

Overall, the evidence suggests that strengthening fiscal governance through more progressive taxation and better-targeted public spending is essential for addressing structural inequality. By providing empirical evidence from Morocco, this study contributes to the literature on fiscal governance and redistribution in developing economies and offers policy insights for advancing inclusive growth and achieving Sustainable Development Goals, particularly SDG 10 (Reduced Inequalities) and SDG 8 (Decent Work and Economic Growth).