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Fiscal Policy and Redistribution in the Dominican Republic

Author

Listed:
  • Jaime Aristy-Escuder

    (INTEC Santo Domingo)

  • Maynor Cabrera

    (FEDES)

  • Blanca Moreno-Dodson

    (World Bank)

  • Miguel Sánchez-Martín

    (World Bank)

Abstract

This paper assesses whether limited redistributive effect of fiscal policy in the Dominican Republic has slowed improvements in poverty and inequality during a period of strong economic growth. Departing from the Commitment to Equity methodology for fiscal incidence analysis (Lustig and Higgins, 2013) this paper introduces new methodological considerations and addresses the time gap between the current fiscal structure (2013) and the latest available household survey (2007) by deflating public revenue and spending data to 2007 prices. Results show that fiscal policy in the Dominican Republic is overall progressive given that, compared to other countries, the fiscal system achieves intermediate levels of inequality reduction (5 Gini points) through direct and indirect taxes, transfers and subsidies, and it generates very little horizontal inequality. At the same time, the impact of direct transfers on poverty reduction is modest, due to the limited cash amounts granted, and there seems to be scope to boosting revenue and enhancing progressivity by revising tax exemptions and indirect electricity subsidies.

Suggested Citation

  • Jaime Aristy-Escuder & Maynor Cabrera & Blanca Moreno-Dodson & Miguel Sánchez-Martín, 2016. "Fiscal Policy and Redistribution in the Dominican Republic," Commitment to Equity (CEQ) Working Paper Series 47, Tulane University, Department of Economics.
    • Handle: RePEc:tul:ceqwps:47
    as

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    File URL: http://repec.tulane.edu/RePEc/ceq/ceq47.pdf
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    References listed on IDEAS

    as
    1. Mr. Ke-young Chu & Mr. Hamid R Davoodi & Mr. Sanjeev Gupta, 2000. "Income Distribution and Tax and Government Social Spending Policies in Developing Countries," IMF Working Papers 2000/062, International Monetary Fund.
    2. Verónica Paz Arauco & George Gray Molina & Ernesto Yáñez Aguilar & Wilson Jiménez Pozo, 2014. "Explaining Low Redistributive Impact in Bolivia," Public Finance Review, , vol. 42(3), pages 326-345, May.
    3. Sanchez, Miguel Eduardo & Senderowitsch, Roby, 2012. "The political economy of the middle class in the Dominican Republic : individualization of public goods, lack of institutional trust and weak collective action," Policy Research Working Paper Series 6049, The World Bank.
    4. Francisco Galrão Carneiro & Aleksandra Iwulska & José-Daniel Reyes & Miguel Eduardo Sánchez-Martín, 2015. "Resilient Growth, Persisting Inequality : Identifying Potential Factors Limiting Shared Prosperity in the Dominican Republic," World Bank Publications - Reports 21499, The World Bank Group.
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    6. Cabrera, Maynor & Lustig, Nora & Morán, Hilcías E., 2015. "Fiscal Policy, Inequality, and the Ethnic Divide in Guatemala," World Development, Elsevier, vol. 76(C), pages 263-279.
    7. Ke-Young Chu & Hamid Davoodi & Sanjeev Gupta, 2000. "Income Distribution and Tax, and Government Social Spending Policies in Developing Countries," WIDER Working Paper Series wp-2000-214, World Institute for Development Economic Research (UNU-WIDER).
    8. Jean-Yves Duclos & Abdelkrim Araar, 2006. "Poverty and Equity," Economic Studies in Inequality, Social Exclusion, and Well-Being, Springer, number 978-0-387-33318-2, Fall.
    9. Cabrera, Maynor & Lustig, Nora & Morán, Hilcías E., 2015. "Fiscal Policy, Inequality, and the Ethnic Divide in Guatemala," World Development, Elsevier, vol. 76(C), pages 263-279.
    10. Mr. Umidjon Abdullaev & Mr. Marcello M. Estevão, 2013. "Growth and Employment in the Dominican Republic: Options for a Job-Rich Growth," IMF Working Papers 2013/040, International Monetary Fund.
    11. John Scott, 2014. "Redistributive Impact and Efficiency of Mexico’s Fiscal System," Public Finance Review, , vol. 42(3), pages 368-390, May.
    12. Chu, Ke-Young & Davoodi, Hamid & Gupta, Sanjeev, 2000. "Income Distribution and Tax, and Government Social Spending Policies in Developing Countries," WIDER Working Papers 295547, United Nations University, World Institute for Development Economic Research (UNU-WIDER).
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    15. Sean Higgins & Claudiney Pereira, 2014. "The Effects of Brazil’s Taxation and Social Spending on the Distribution of Household Income," Public Finance Review, , vol. 42(3), pages 346-367, May.
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Martinez Aguilar,Sandra Natalia & Fuchs Tarlovsky,Alan & Ortiz-Juarez,Eduardo & Del Carmen Hasbun,Giselle Eugenia, 2017. "The impact of fiscal policy on inequality and poverty in Chile," Policy Research Working Paper Series 7939, The World Bank.
    2. Jon Jellema & Nora Lustig & Astrid Haas & Sebastian Wolf, 2016. "The Impact of Taxes, Transfers, and Subsidies on Inequality and Poverty in Uganda," Commitment to Equity (CEQ) Working Paper Series 53, Tulane University, Department of Economics.
    3. Nora Lustig, 2016. "Fiscal policy, inequality and the poor in the developing world," Working Papers 418, ECINEQ, Society for the Study of Economic Inequality.
    4. Nora Lustig, 2017. "Fiscal Policy, Income Redistribution and Poverty Reduction in Low and Middle Income Countries," Commitment to Equity (CEQ) Working Paper Series 54, Tulane University, Department of Economics.
    5. Nora Lustig, 2016. "Fiscal policy, inequality, and the poor in the developing world," WIDER Working Paper Series 164a, World Institute for Development Economic Research (UNU-WIDER).
    6. Canavire Bacarreza, Gustavo J. & Aliaga, Guillermo Gómez & Britton, Chevanne & Rios-Avila, Fernando & Pozo, Wilson Jimenez & Ibarra, Silvia Granados & Li, Ran, 2024. "Fiscal Incidence on the Island: Grenada's Fiscal System and Its Incidence," IZA Discussion Papers 16795, Institute of Labor Economics (IZA).
    7. Pessino, Carola & Izquierdo, Alejandro & Vuletin, Guillermo, 2018. "Better Spending for Better Lives: How Latin America and the Caribbean Can Do More with Less," IDB Publications (Books), Inter-American Development Bank, number 9152.
    8. Higgins, Sean & Lustig, Nora, 2016. "Can a poverty-reducing and progressive tax and transfer system hurt the poor?," Journal of Development Economics, Elsevier, vol. 122(C), pages 63-75.
    9. Nora Lustig, 2016. "Fiscal Policy, Inequality and the Poor in the Developing World," Working Papers 1612, Tulane University, Department of Economics, revised Aug 2017.
    10. Nora Lustig, 2016. "Commitment to Equity Handbook. A Guide to Estimating the Impact of Fiscal Policy on Inequality and Poverty," Commitment to Equity (CEQ) Working Paper Series 01, Tulane University, Department of Economics.
    11. Lustig, Nora, 2017. "El impacto del sistema tributario y el gasto social en la distribución del ingreso y la pobreza en América Latina. Una aplicación del marco metodológico del proyecto Compromiso con la Equidad (CEQ)," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(335), pages .493-568, julio-sep.

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