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Income redistribution and inequality in the Mexican tax-benefit system

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  • Luis Huesca

Abstract

The paper examines the redistributive effect that was achieved by the Mexican taxbenefit system in 2014 using personal income tax, indirect taxes, social security contributions and social benefits. Our goal is to analyse the impact on inequality due to fiscal system action and then go further by demonstrating to what extent the contributions have on the total redistribution effect. The Mexican tax-benefit system is characterised by significant pre-fiscal income inequality. The contribution made by Vertical Equity (VE) is relatively important, but Horizontal Inequity (HI) reduces its impact. Income taxation does not greatly contribute to VE. Furthermore, some households receive unequal benefits, and therefore decrease the positive effect induced by VE. En este artículo se examina el efecto redistributivo del sistema fiscal mexicano 2014, usando impuestos directos e indirectos, contribuciones de seguridad social, pensiones y transferencias, con el objetivo de analizar su contribución en la reducción de la desigualdad. El sistema fiscal mexicano presenta una mayor desigualdad del ingreso prefiscal y elevados niveles de inequidad horizontal (HI). Asimismo, los impuestos indirectos no contribuyen en gran medida a la equidad vertical (VE) y algunas transferencias se dirigen de forma desigual a los hogares. Dichos aspectos disminuyen el efecto positivo inducido por VE.

Suggested Citation

  • Luis Huesca, 2017. "Income redistribution and inequality in the Mexican tax-benefit system," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, vol. 36(72), October.
    • Handle: RePEc:col:000093:015846
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    More about this item

    Keywords

    Non- parametric analysis; income inequality; redistribution; verticalequity and horizontal inequity; fiscal system.;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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