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Do poorer countries have less capacity for redistribution ?

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  • Ravallion, Martin

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 The World Bank in its series Policy Research Working Paper Series with number 5046.

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Date of creation: 01 Sep 2009
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Handle: RePEc:wbk:wbrwps:5046

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Keywords: Achieving Shared Growth; Rural Poverty Reduction; Population Policies; Debt Markets; Inequality;

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  1. Kakwani, Nanak C, 1977. "Measurement of Poverty and Negative-Income Tax," Australian Economic Papers, Wiley Blackwell, Wiley Blackwell, vol. 16(29), pages 237-48, December.
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  6. Danziger, Sheldon & Gottschalk, Peter & Smolensky, Eugene, 1989. "How the Rich Have Fared, 1973-87," American Economic Review, American Economic Association, American Economic Association, vol. 79(2), pages 310-14, May.
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  9. 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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Cited by:
  1. 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.
  2. Pritchett, Lant & Kenny, Charles, 2013. "Promoting Millennium Development Ideals: The Risks of Defining Development Down," Working Paper Series, Harvard University, John F. Kennedy School of Government rwp13-033, Harvard University, John F. Kennedy School of Government.
  3. Niño-Zarazúa, Miguel & Barrientos, Armando & Hulme, David & Hickey, Sam, 2010. "Social protection in sub-Saharan Africa: Will the green shoots blossom?," MPRA Paper 22422, University Library of Munich, Germany.
  4. Peter Edward & Andy Sumner, 2014. "The Poor, the Prosperous and the ?Inbetweeners?: A Fresh Perspective on Global Society, Inequality and Growth," Working Papers 122, International Policy Centre for Inclusive Growth.
  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. Andy Sumner, 2012. "The Buoyant Billions: How “Middle Class” Are the New Middle Classes in Developing Countries? (And Why Does It Matter?)," Working Papers, Center for Global Development 309, Center for Global Development.
  7. Sumner, Andy, 2012. "Where Do The Poor Live?," World Development, Elsevier, Elsevier, vol. 40(5), pages 865-877.
  8. Stefan Dercon, 2011. "Social Protection, Efficiency and Growth," Economics Series Working Papers WPS/2011-17, University of Oxford, Department of Economics.
  9. Gentilini, Ugo & Omamo, Steven Were, 2011. "Social protection 2.0: Exploring issues, evidence and debates in a globalizing world," Food Policy, Elsevier, Elsevier, vol. 36(3), pages 329-340, June.
  10. Andy Sumner, 2012. "Where Will the World’s Poor Live? An Update on Global Poverty and the New Bottom Billion," Working Papers, Center for Global Development 305, Center for Global Development.
  11. Niño-Zarazúa, Miguel & Barrientos, Armando & Hickey, Samuel & Hulme, David, 2012. "Social Protection in Sub-Saharan Africa: Getting the Politics Right," World Development, Elsevier, Elsevier, vol. 40(1), pages 163-176.
  12. 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, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).

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