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The Impact of Brazil's Tax-Benefit System on Inequality and Poverty

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Author Info

  • Immervoll, Herwig

    ()
    (OECD, Paris)

  • Levy, Horacio

    ()
    (University of Essex)

  • Nogueira, José Ricardo

    ()
    (Universidade Federal de Pernambuco)

  • O'Donoghue, Cathal

    ()
    (Teagasc Rural Economy Research Centre)

  • Siqueira, Rozane Bezerra de

    ()
    (Universidade Federal de Pernambuco)

Abstract

The Brazilian government raises taxes amounting to 35% of GDP and spends more than two thirds of this on social programmes. These shares are in pair with the OECD averages and well in excess of Latin America averages. However, while tax-benefit systems in most OECD countries reduce income disparities very significantly, the Brazilian government has been much less successful in alleviating inequality and poverty. Focussing on taxes and cash transfers, this paper investigates the impact of the government budget on the income distribution in Brazil, and evaluates its efficiency and effectiveness in reducing inequality and poverty. We present BRAHMS, a new tax-benefit microsimulation model for Brazil and illustrate its use by evaluating the impact of policy on economic inequality. It is argued that microsimulation provides a valuable analytical tool for policy makers in emerging and developing countries in particular.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2114.

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Length: 29 pages
Date of creation: May 2006
Date of revision:
Publication status: published in: Klasen, S. and F. Nowak-Lehmann (eds.), Poverty, Inequality, and Policy in Latin America, MIT Press, 2009
Handle: RePEc:iza:izadps:dp2114

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Keywords: microsimulation; Brazil; inequality; poverty; redistribution;

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References

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  1. Immervoll, Herwig & Levy, Horacio & Lietz, Christine & Mantovani, Daniela & O'Donoghue, Cathal & Sutherland, Holly & Verbist, Gerlinde, 2006. "Household Incomes and Redistribution in the European Union: Quantifying the Equalising Properties of Taxes and Benefits," Economics Series, Institute for Advanced Studies 184, Institute for Advanced Studies.
  2. David Piachaud & Holly Sutherland & UNICEF Innocenti Research Centre, 2000. "How Effective is the British Government's Attempt to Reduce Child Poverty?," Innocenti Working Papers inwopa00/6, UNICEF Innocenti Research Centre.
  3. Sutherland, Holly & Immervoll, Herwig & O'Donoghue, Cathal, 1999. "An introduction to EUROMOD," EUROMOD Working Papers EM0/99, EUROMOD at the Institute for Social and Economic Research.
  4. Chu, K.-y. & Davoodi, H. & Gupta, S., 2000. "Income Distribution and Tax, and Government Social Spending Policies in Developing Countries," Research Paper, World Institute for Development Economics Research 214, World Institute for Development Economics Research.
  5. Buhmann, Brigitte, et al, 1988. "Equivalence Scales, Well-Being, Inequality, and Poverty: Sensitivity Estimates across Ten Countries Using the Luxembourg Income Study (LIS) Database," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 34(2), pages 115-42, June.
  6. Atkinson, Tony, et al, 2002. "Microsimulation of Social Policy in the European Union: Case Study of a European Minimum Pension," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 69(274), pages 229-43, May.
  7. Rozane Bezerra de Siqueira & José Ricardo Nogueira & Cathal O'Donoghue, 2003. "Simulating Brazil Tax-Benefit System Using Brahms, the Brazilian Household Microsimulation Model," Anais do XXXI Encontro Nacional de Economia [Proceedings of the 31th Brazilian Economics Meeting], ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Gr b50, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  8. Sutherland, Holly, 2001. "EUROMOD: an integrated European benefit-tax model: final report," EUROMOD Working Papers EM9/01, EUROMOD at the Institute for Social and Economic Research.
  9. Rodolfo Hoffmann, 2003. "Inequality in Brazil: The Contribution of Pensions," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 57(4), pages 755-773, October.
  10. José Ricardo Nogueira & Rozane Bezerra de Siqueira & Evaldo Santana de Souza, 2001. "A Incidência Final dos Impostos Indiretos no Brasil: Efeitos da Tributação de Insumos," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 55(4), pages 513-544, October.
  11. Cathal O'Donoghue & Massimo Baldini, 2004. "Modelling the Redistributive Impact of Indirect Taxes in Europe: An Application of EUROMOD," Working Papers, National University of Ireland Galway, Department of Economics 0077, National University of Ireland Galway, Department of Economics, revised 2004.
  12. Ernesto Schiefelbein, 1997. "School-related Economic Incentives in Latin America: Reducing drop-out and repetition and combating child labour," Innocenti Occasional Papers, Child Rights Series, UNICEF Innocenti Research Centre iopcrs97/5, UNICEF Innocenti Research Centre.
  13. Creedy, J., 1997. "Evaluating Income Tax Changes and the Choice of Income Measures," Department of Economics - Working Papers Series, The University of Melbourne 577, The University of Melbourne.
  14. Podder, Nripesh, 1993. "The Disaggregation of the Gini Coefficient by Factor Components and Its Applications to Australia," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 39(1), pages 51-61, March.
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Citations

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Cited by:
  1. Chung Tran & Juergen Jung, 2007. "The Extension of Social Security Coverage in Developing Countries," Caepr Working Papers, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington 2007-026, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  2. Nora Lustig, George Gray-Molina, Sean Higgins, Miguel Jaramillo, Wilson Jiménez, Veronica Paz, Claudiney Pereira, Carola Pessino, John Scott, and Ernesto Yañez, 2012. "The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico, and Peru: A Synthesis of Results," Working Papers, Center for Global Development 311, Center for Global Development.
  3. Nora Lustig & Sean Higgins, 2012. "Commitment to Equity Assessment (CEQ): Estimating the Incidence of Social Spending, Subsidies and Taxes Handbook," Working Papers, Tulane University, Department of Economics 1219, Tulane University, Department of Economics.
  4. Gerhard Glomm & Juergen Jung & Chung Tran, 2006. "Macroeconomic Implications of Early Retirement in the Public Sector: The Case of Brazil," Caepr Working Papers, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington 2006-008, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  5. Olivier Bargain & Prudence Kwenda, 2009. "The Informal Sector Wage Gap - New Evidence Using Quantile Estimations on Panel Data," Working Papers, School Of Economics, University College Dublin 200905, School Of Economics, University College Dublin.
  6. Sean Higgins & Nora Lustig & Whitney Ruble & Timothy Smeeding, 2013. "Comparing the Incidence of Taxes and Social Spending in Brazil and the United States," Working Papers, Tulane University, Department of Economics 1317, Tulane University, Department of Economics.
  7. Horacio Levy & José Ricardo Nogueira & Rozane Bezerra Siqueira & Herwig Immervoll & Cathal O'Donoghue, 2010. "Simulating the impact of inflation on the progressivity of personal income tax in Brazil," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 64(4), pages 405-422, December.
  8. Olivier Bargain & Prudence Kwenda, 2009. "The Informal Sector Wage Gap: New Evidence Using Quantile Regressions on Panel Data," CEDI Discussion Paper Series, Centre for Economic Development and Institutions(CEDI), Brunel University 09-06, Centre for Economic Development and Institutions(CEDI), Brunel University.
  9. Nora Lustig & Florencia Amábile & Marisa Bucheli & George Gray Molina & Sean Higgins & Miguel Jaramillo & Wilson Jiménez Pozo & Veronica Paz Arauco & Claudiney Pereira & Carola Pessino & Máximo Ros, 2013. "The impact of taxes and social spending on inequality and poverty in Argentina, Bolivia, Brazil, Mexico, Peru and Uruguay: An overview," Working Papers 315, ECINEQ, Society for the Study of Economic Inequality.
  10. Sean Higgins, Nora Lustig, Whitney Ruble, and Timothy Smeeding, 2014. "Comparing the Incidence of Taxes and Social Spending in Brazil and the United States - Working Paper 360," Working Papers, Center for Global Development 360, Center for Global Development.

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