Expenditure incidence is the effect of

government expenditure Government spending or expenditure includes all government consumption, investment, and transfer payments. In national income accounting, the acquisition by governments of goods and services for current use, to directly satisfy the individual o ...

upon the distribution of private incomes. This is commonly contrasted with benefit incidence as an approach to planning and measuring the effect of a government spending programme. A pioneering analysis of this was made by the economist Richard Musgrave in his major work, ''The Theory of Public Finance''. Establishing the differential effect of expenditure in this way is difficult because the effect of differing policies upon taxation and overall expenditure must be normalised and it is hard to model and measure the flows of money which result. An analysis will commonly be structured in three stages: #Definition of the government programmes or budgetary expenditures and the corresponding database of monetary values. #Determining the measures of income: the size of economic unit such as the individual, family or community; the timescale of analysis such as annual or lifetime; the well-being and

externalities In economics, an externality is an indirect cost (external cost) or indirect benefit (external benefit) to an uninvolved third party that arises as an effect of another party's (or parties') activity. Externalities can be considered as unpriced ...

which arise from the expenditure. #The resulting effects upon

income distribution In economics, income distribution covers how a country's total GDP is distributed amongst its population. Economic theory and economic policy have long seen income and its distribution as a central concern. Unequal distribution of income causes e ...

as a result of the expenditure are then calculated. These will typically be presented graphically as a

Lorenz curve In economics, the Lorenz curve is a graphical representation of the distribution of income or of wealth. It was developed by Max O. Lorenz in 1905 for representing Economic inequality, inequality of the wealth distribution. The curve is a graph ...

or in the form of an index such as the

Gini coefficient In economics, the Gini coefficient ( ), also known as the Gini index or Gini ratio, is a measure of statistical dispersion intended to represent the income distribution, income inequality, the wealth distribution, wealth inequality, or the ...

References

Further reading