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Inequality and Fiscal Redistribution in Middle Income Countries: Brazil, Chile, Colombia, Indonesia, Mexico, Peru and South Africa

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  • Lustig Nora

    (Department of Economics, Tulane University, New Orleans, LA, USA)

Abstract

This paper examines the redistributive impact of fiscal policy for Brazil, Chile, Colombia, Indonesia, Mexico, Peru and South Africa using comparable fiscal incidence analysis with data from around 2010. The largest redistributive effect is in South Africa and the smallest in Indonesia. Success in fiscal redistribution is driven primarily by redistributive effort (share of social spending to GDP in each country) and the extent to which transfers/subsidies are targeted to the poor and direct taxes targeted to the rich. While fiscal policy always reduces inequality, this is not the case with poverty. When pensions are not considered a transfer, fiscal policy increases poverty in Brazil (over and above market income poverty) due to high consumption taxes on basic goods. Total spending on education is pro-poor except for Indonesia, where it is neutral in absolute terms. Health spending is pro-poor in Brazil, Chile and South Africa, roughly neutral in absolute terms in Mexico, and not pro-poor in Indonesia and Peru.

Suggested Citation

  • Lustig Nora, 2016. "Inequality and Fiscal Redistribution in Middle Income Countries: Brazil, Chile, Colombia, Indonesia, Mexico, Peru and South Africa," Journal of Globalization and Development, De Gruyter, vol. 7(1), pages 17-60, June.
    • Handle: RePEc:bpj:globdv:v:7:y:2016:i:1:p:17-60:n:2
    DOI: 10.1515/jgd-2016-0015
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    More about this item

    Keywords

    developing countries; fiscal incidence; inequality; poverty; social spending;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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