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Do Poorer Countries Have Less Capacity for Redistribution?

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  • Martin Ravallion

    ()
    (World Bank)

Abstract

Development aid and policy discussions often assume that poorer countries have less internal capacity for redistribution in favor of their poorest citizens. The assumption is tested using data for 90 developing countries. The capacity for redistribution is measured by the marginal tax rate on those who are not poor by rich-country standards that is needed to cover the poverty gap or to provide a poverty-level of basic income, judged by developing-country standards. For most (but not all) countries with annual consumption per capita under $2,000 (at 2005 purchasing power parity) the required tax burdens are found to be prohibitive-often calling for marginal tax rates of 100 percent or more. By contrast, the required tax rates are quite low (1 percent on average) among all countries with consumption per capita over $4,000, as well as some poorer countries. Most countries fall into one of two groups: those with little or no realistic prospect of addressing extreme poverty through redistribution from the"rich"and those that would appear to have ample scope for such redistribution. Economic growth tends to move countries from the first group to the second. Thus the appropriate balance between growth and redistribution strategies can be seen to depend on the level economic development.

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Paper provided by International Policy Centre for Inclusive Growth in its series One Pager Chinese with number 97.

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Length: 1
Date of creation: Feb 2011
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Publication status: Published by UNDP - International Policy Centre for Inclusive Growth , February 2011, pages 1-1
Handle: RePEc:ipc:opchin:97

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  1. Standing Guy, 2008. "How Cash Transfers Promote the Case for Basic Income," Basic Income Studies, De Gruyter, vol. 3(1), pages 1-30, July.
  2. Herwig Immervoll, 2004. "Average and Marginal Effective Tax Rates Facing Workers in the EU: A Micro-Level Analysis of Levels, Distributions and Driving Factors," OECD Social, Employment and Migration Working Papers 19, OECD Publishing.
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  7. Kanbur, Ravi & Mukherjee, Diganta, 2007. "Poverty, Relative to the Ability to Eradicate It: An Index of Poverty Reduction Failure," Working Papers 126998, Cornell University, Department of Applied Economics and Management.
  8. Ariel Fiszbein & Norbert Schady & Francisco H. G. Ferreira & Margaret Grosh & Niall Keleher & Pedro Olinto & Emmanuel Skoufias, 2009. "Conditional Cash Transfers : Reducing Present and Future Poverty," World Bank Publications, The World Bank, number 2597, October.
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Cited by:
  1. Gentilini, Ugo & Omamo, Steven Were, 2011. "Social protection 2.0: Exploring issues, evidence and debates in a globalizing world," Food Policy, Elsevier, vol. 36(3), pages 329-340, June.
  2. Andy Sumner, 2012. "Where Will the World’s Poor Live? An Update on Global Poverty and the New Bottom Billion," Working Papers 305, Center for Global Development.
  3. Sumner, Andy, 2013. "Global poverty, aid, and middle-income countries: Are the country classifications moribund or is global poverty in the process of .nationalizing.?," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  4. Stefan Dercon, 2011. "Social Protection, Efficiency and Growth," CSAE Working Paper Series 2011-17, Centre for the Study of African Economies, University of Oxford.
  5. Stefan Dercon, 2014. "Climate Change, Green Growth and Aid Allocation to Poor Countries," CSAE Working Paper Series 2014-24, Centre for the Study of African Economies, University of Oxford.
  6. d'Agostino, Giorgio & Scarlato, Margherita, 2011. "Innovation, Growth and Quality of Life: a Theoretical Model and an Estimate for the Italian Regions," MPRA Paper 31939, University Library of Munich, Germany.
  7. Miguel Niño-Zarazúa & Armando Barrientos & David Hulme & Sam Hickey, 2010. "Social protection in sub-Saharan Africa: Will the green shoots blossom?," Brooks World Poverty Institute Working Paper Series 11610, BWPI, The University of Manchester.
  8. Pritchett, Lant & Kenny, Charles, 2013. "Promoting Millennium Development Ideals: The Risks of Defining Development Down," Working Paper Series rwp13-033, Harvard University, John F. Kennedy School of Government.
  9. Niño-Zarazúa, Miguel & Barrientos, Armando & Hickey, Samuel & Hulme, David, 2012. "Social Protection in Sub-Saharan Africa: Getting the Politics Right," World Development, Elsevier, vol. 40(1), pages 163-176.
  10. Sumner, Andy, 2012. "Where Do The Poor Live?," World Development, Elsevier, vol. 40(5), pages 865-877.
  11. Andy Sumner, 2012. "The Buoyant Billions: How “Middle Class” Are the New Middle Classes in Developing Countries? (And Why Does It Matter?)," Working Papers 309, Center for Global Development.

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