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On the middle 70%. The impact of fiscal policy on the emerging middle class in Latin America using Commitment to Equity

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  • Daude, Christian
  • Lustig, Nora
  • Melguizo, Angel
  • Perea, Jose Ramon

Abstract

This paper analyzes the effects of indirect and direct taxes, as well as monetary and in-kind transfers on the income distribution in nine Latin American countries applying the CEQ methodology and using household and expenditure microdata around 2010. In particular, we focus on the effect of fiscal policies on two groups of the emerging middle class: the vulnerable and the middle class. We find that while the vulnerable tend to be net receivers in fiscal terms, especially when including in-kind transfers, the middle class seems to be mainly a net payer. This might be aggravated by the perception of a relatively low quality of in-kind transfers, notably in education and health-care services. We provide some evidence based on subjective surveys pointing in this direction.

Suggested Citation

  • Daude, Christian & Lustig, Nora & Melguizo, Angel & Perea, Jose Ramon, 2017. "On the middle 70%. The impact of fiscal policy on the emerging middle class in Latin America using Commitment to Equity," Research Department working papers 1087, CAF Development Bank Of Latinamerica.
    • Handle: RePEc:dbl:dblwop:1087
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    References listed on IDEAS

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    8. Nora Lustig & Carola Pessino & John Scott, 2014. "The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico, Peru, and Uruguay: Introduction to the Special Issue," Public Finance Review, , vol. 42(3), pages 287-303, May.
    9. Nora Lustig & Carola Pessino & John Scott, 2013. "The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico, Peru and Uruguay: An Overview," Working Papers 1313, Tulane University, Department of Economics.
    10. Roberto Angulo & Alejandro Gaviria Uribe & Liliana Morales, 2014. "La década ganada: evolución de la clase media, la pobreza y la vulnerabilidad en Colombia 2002-2011," Coyuntura Económica, Fedesarrollo, June.
    11. Nora Lustig & Sean Higgins, 2012. "Fiscal Incidence, Fiscal Mobility and the Poor: A New Approach," Working Papers 1202, Tulane University, Department of Economics.
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    13. Angel Melguizo, 2015. "Pensions, informality, and the emerging middle class," IZA World of Labor, Institute of Labor Economics (IZA), pages 169-169, July.
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    Cited by:

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    2. Haydeeliz Carrasco & Hamidou Jawara & Moritz Meyer, 2022. "The Effects Of Fiscal Policy On Inequality And Poverty In The Gambia," Commitment to Equity (CEQ) Working Paper Series 117, Tulane University, Department of Economics.

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    More about this item

    Keywords

    Desarrollo social; Economía; Impuestos; Investigación socioeconómica;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General

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