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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. Cathal O'Donoghue & Massimo Baldini, 2004. "Modelling the Redistributive Impact of Indirect Taxes in Europe: An Application of EUROMOD," Working Papers 0077, National University of Ireland Galway, Department of Economics, revised 2004.
  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. 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.
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  5. 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] b50, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  6. Chu, K.-y. & Davoodi, H. & Gupta, S., 2000. "Income Distribution and Tax, and Government Social Spending Policies in Developing Countries," Research Paper 214, World Institute for Development Economics Research.
  7. 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.
  8. Creedy, J., 1997. "Evaluating Income Tax Changes and the Choice of Income Measures," Department of Economics - Working Papers Series 577, The University of Melbourne.
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  10. 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.
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  12. 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.
  13. 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 184, Institute for Advanced Studies.
  14. 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 iopcrs97/5, UNICEF Innocenti Research Centre.
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  16. 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, vol. 69(274), pages 229-43, May.
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Citations

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Cited by:
  1. 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 316, ECINEQ, Society for the Study of Economic Inequality.
  2. 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.
  3. 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.
  4. Olivier Bargain & Prudence Kwenda, 2009. "The Informal Sector Wage Gap - New Evidence Using Quantile Estimations on Panel Data," Working Papers 200905, School Of Economics, University College Dublin.
  5. Nora Lustig & George Gray Molina & Sean Higgins & Miguel Jaramillo & Wilson Jimenez & Veronica Paz & Claudiney Pereira & Carola Pessino & John Scott & Ernesto Yanez, 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 1216, Tulane University, Department of Economics.
  6. Olivier Bargain & Prudence Kwenda, 2009. "The Informal Sector Wage Gap: New Evidence Using Quantile Regressions on Panel Data," CEDI Discussion Paper Series 09-06, Centre for Economic Development and Institutions(CEDI), Brunel University.
  7. Gerhard Glomm & Juergen Jung & Chung Tran, 2006. "Macroeconomic Implications of Early Retirement in the Public Sector: The Case of Brazil," Caepr Working Papers 2006-008, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  8. Nora Lustig & Sean Higgins, 2012. "Commitment to Equity Assessment (CEQ): Estimating the Incidence of Social Spending, Subsidies and Taxes Handbook," Working Papers 1219, Tulane University, Department of Economics.
  9. Jung, Juergen & Tran, Chung, 2012. "The extension of social security coverage in developing countries," Journal of Development Economics, Elsevier, vol. 99(2), pages 439-458.
  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 360, Center for Global Development.

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