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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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    Cited by:

    1. Edward Anderson & Maria Ana Jalles D'Orey & Maren Duvendack & Lucio Esposito, 2017. "Does Government Spending Affect Income Inequality? A Meta-Regression Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 31(4), pages 961-987, September.
    2. Nora Lustig & Yang Wang, 2020. "The Impact of Taxes and Transfers on Income Inequality, Poverty, and the Urban-Rural And Regional Income Gaps in China," Commitment to Equity (CEQ) Working Paper Series 93, Tulane University, Department of Economics.
    3. Nora Lustig, 2018. "Measuring the Distribution of Household Income, Consumption and Wealth: State of Play and Measurement Challenges," Working Papers 1801, Tulane University, Department of Economics.
    4. Mohamed Traoré, 2018. "Government spending and inclusive growth in sub-Saharan Africa: A panel VAR analysis," CERDI Working papers hal-01940506, HAL.
    5. Chu, Lan Khanh & Hoang, Dung Phuong, 2020. "How does economic complexity influence income inequality? New evidence from international data," Economic Analysis and Policy, Elsevier, vol. 68(C), pages 44-57.
    6. Orsetta Causa & Mikkel Hermansen, 2018. "Income Redistribution Through Taxes and Transfers across OECD Countries," LIS Working papers 729, LIS Cross-National Data Center in Luxembourg.
    7. Eduardo Olaberría, 2016. "Bringing all Chileans on board," OECD Economics Department Working Papers 1289, OECD Publishing.
    8. Cesar Cancho & Elena Bondarenko, 2017. "The Distributional Impact of Fiscal Policy in Georgia," Commitment to Equity (CEQ) Working Paper Series 42, Tulane University, Department of Economics.
    9. Patrice Ollivaud, 2017. "Improving the allocation and efficiency of public spending in Indonesia," OECD Economics Department Working Papers 1381, OECD Publishing.
    10. Orsetta Causa & Mikkel Hermansen, 2017. "Income redistribution through taxes and transfers across OECD countries," OECD Economics Department Working Papers 1453, OECD Publishing.
    11. Jose Cuesta & Mario Negre & Ana Revenga & Maika Schmidt, 2018. "Tackling Income Inequality: What Works and Why?," Journal of Income Distribution, Ad libros publications inc., vol. 26(1), pages 1-48, March.
    12. Arief A. Yusuf & Reza Anglingkusumo & Andy Sumner & Putri R. Halim & Anggita C.M. Kusuma, 2020. "Routinization And The Changing Task Composition In The Labor Market: Evidence From Indonesia," Working Papers WP/06/2020, Bank Indonesia.
    13. Vladimir Hlasny, 2019. "Redistributive Impacts of Fiscal Policies in Mexico: Corrections for Top Income Measurement Problems," LIS Working papers 765, LIS Cross-National Data Center in Luxembourg.
    14. 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.
    15. Nora Lustig, 2016. "El Impacto del Sistema Tributario y el Gasto Social en la Distribucion del Ingreso y la Pobreza en America Latina: Argentina, Bolivia, Brasil, Chile, Colombia, Costa Rica Ecuador, El Salvador, Guatema," Commitment to Equity (CEQ) Working Paper Series 37, Tulane University, Department of Economics.
    16. Nora Lustig, 2015. "The Redistributive Impactive of Government Spending on Education and Health Evidence from Thirteen Developing Countries in the Commitment to Equity Project," Commitment to Equity (CEQ) Working Paper Series 1330, Tulane University, Department of Economics.
    17. Arief Anshory Yusuf & Andy Sumner, 2017. "Multidimensional poverty in Indonesia: How inclusive has economic growth been?," Departmental Working Papers 2017-09, The Australian National University, Arndt-Corden Department of Economics.
    18. Warwick, Ross & Harris, Tom & Phillips, David & Goldman, Maya & Jellema, Jon & Inchauste, Gabriela & Goraus-Tańska, Karolina, 2022. "The redistributive power of cash transfers vs VAT exemptions: A multi-country study," World Development, Elsevier, vol. 151(C).
    19. Sean Higgins & Nora Lustig, 2015. "Can Poverty-Reducing and Progressive Tax and Transfer System Hurt the Poor?," Commitment to Equity (CEQ) Working Paper Series 1333, Tulane University, Department of Economics.
    20. Nora Lustig, 2016. "El Impacto del Sistema Tributario y el Gasto Social en la Distribución del Ingreso y la Pobreza en América Latina: Argentina, Bolivia, Brasil, Chile, Colombia, Costa Rica Ecuador, El Salvador, Guatema," Commitment to Equity (CEQ) Working Paper Series 1337, Tulane University, Department of Economics.
    21. Mohamed Traoré, 2018. "Government spending and inclusive growth in sub-Saharan Africa: A panel VAR analysis," Working Papers hal-01940506, HAL.
    22. Nora Lustig, 2015. "The Redistributive Impactive of Government Spending on Education and Health Evidence from Thirteen Developing Countries in the Commitment to Equity Project," Commitment to Equity (CEQ) Working Paper Series 30, Tulane University, Department of Economics.
    23. Luis F. Lopez-Calva & Nora Lustig & Mikhail Matytsin & Daria Popova, 2017. "Who Benefits from Fiscal Redistribution in the Russian Federation?," Commitment to Equity (CEQ) Working Paper Series 39, Tulane University, Department of Economics.
    24. Christopher Hoy & Russell Toth & Nurina Merdikawati, 2020. "How does Information about Inequality Shape Voting Intentions and Preferences for Redistribution? Evidence from a Randomized Survey Experiment in Indonesia," Working Papers 517, ECINEQ, Society for the Study of Economic Inequality.

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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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