Business cycles and redistribution: The role of government quality

We study how government quality mediates the relationship between business cycles and re-distribution. Our key hypothesis is that the potential of income redistribution to reduce rising inequality levels after an economic crisis depends on government quality. The empirical evidence based on a panel of 46 countries over the period 1996-2016 lends strong support to this hy-pothesis. We find that macroeconomic recessions promote redistribution of income in high government quality contexts, but they lead to wider economic inequalities in countries with poor quality of government.(c) 2022 Elsevier B.V. All rights reserved.