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Pro-Poor Tax Reforms, with an Application to Mexico

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  • Duclos, Jean-Yves

    ()
    (Université Laval)

  • Makdissi, Paul

    ()
    (University of Ottawa)

  • Araar, Abdelkrim

    ()
    (Université Laval)

Abstract

This paper proposes a methodology for testing for whether tax reforms are pro-poor. This is done by extending stochastic dominance techniques to help identify tax reforms that will necessarily be deemed absolutely or relatively pro-poor by a wide spectrum of poverty analysts. The statistical properties of the various estimators are also derived in order to make the method implementable using survey data. The methodology is used to assess the pro-poorness of possible reforms to Mexico’s indirect tax system. This leads to the identification of several possible pro-poor tax reforms in that country. It also shows how the pro-poorness of a tax reform depends on one’s conception of poverty as well as on the revenue and efficiency impact of the reform.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4511.

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Length: 39 pages
Date of creation: Oct 2009
Date of revision:
Publication status: published in: International Tax and Public Finance, 2013, [Online First]
Handle: RePEc:iza:izadps:dp4511

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Keywords: pro-poor changes; tax reforms; stochastic dominance; Mexico;

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References

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  1. Jean-Yves Duclos & Quentin Wodon, 2004. "What is "Pro-Poor"?," Cahiers de recherche, CIRPEE 0425, CIRPEE.
  2. Davidson, Russell & Duclos, Jean-Yves, 2006. "Testing for Restricted Stochastic Dominance," IZA Discussion Papers 2047, Institute for the Study of Labor (IZA).
  3. Paolo Liberati, 2003. "Poverty Reducing Reforms and Subgroup Consumption Dominance Curves," Review of Income and Wealth, International Association for Research in Income and Wealth, International Association for Research in Income and Wealth, vol. 49(4), pages 589-601, December.
  4. Mayshar, Joram & Yitzhaki, Shlomo, 1996. "Dalton-improving tax reform: When households differ in ability and needs," Journal of Public Economics, Elsevier, Elsevier, vol. 62(3), pages 399-412, November.
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  6. Jean-Yves Duclos & Paul Makdissi & Quentin Wodon, 2004. "Socially-Improving Tax Reforms," Cahiers de recherche, CIRPEE 0401, CIRPEE.
  7. Satya Ranjan Chakravarty, 1983. "Ethically Flexible Measures of Poverty," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 16(1), pages 74-85, February.
  8. Jean-Yves Duclos & Paul Makdissi, 2004. "Restricted and Unrestricted Dominance for Welfare, Inequality, and Poverty Orderings," Journal of Public Economic Theory, Association for Public Economic Theory, Association for Public Economic Theory, vol. 6(1), pages 145-164, 02.
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  19. Shlomo Yitzhaki & Joel Slemrod, 1987. "Welfare Dominance: An Application to Commodity Taxation," NBER Working Papers 2451, National Bureau of Economic Research, Inc.
  20. Ravallion, Martin & Datt, Gaurav, 2002. "Why has economic growth been more pro-poor in some states of India than others?," Journal of Development Economics, Elsevier, Elsevier, vol. 68(2), pages 381-400, August.
  21. Yitzhaki, Shlomo & Thirsk, Wayne, 1990. "Welfare dominance and the design of excise taxation in the Cote d'ivoire," Journal of Development Economics, Elsevier, Elsevier, vol. 33(1), pages 1-18, July.
  22. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, Econometric Society, vol. 52(3), pages 761-66, May.
  23. Son, Hyun Hwa, 2004. "A note on pro-poor growth," Economics Letters, Elsevier, Elsevier, vol. 82(3), pages 307-314, March.
  24. Kolm, Serge-Christophe, 1976. "Unequal inequalities. I," Journal of Economic Theory, Elsevier, Elsevier, vol. 12(3), pages 416-442, June.
  25. Makdissi, Paul & Wodon, Quentin, 2002. "Consumption dominance curves: testing for the impact of indirect tax reforms on poverty," Economics Letters, Elsevier, Elsevier, vol. 75(2), pages 227-235, April.
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Cited by:
  1. Wasiu Adekunle Are, 2012. "Poverty-Reducing Directions of Indirect Marginal Tax Reforms in Ireland," Working Papers, School Of Economics, University College Dublin 201230, School Of Economics, University College Dublin.

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