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Fiscal Policy, Inequality, and the Ethnic Divide in Guatemala

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  • Cabrera, Maynor
  • Lustig, Nora
  • Morán, Hilcías E.

Abstract

Guatemala is among the most unequal countries in Latin America. It also has the highest incidence of poverty, especially for the indigenous population. In this paper we do a fiscal incidence analysis using the 2009–10 household survey ENIGFAM. The results show that fiscal policy does very little to reduce inequality and poverty overall and along ethnic lines. Persistently low tax revenues are the main limiting factor. Even worse, tax revenues are not only low but also regressive and burdensome on the poor. Consumption taxes are high enough to offset the benefits of cash transfers: poverty after taxes and cash transfers is higher than market income poverty.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:wdevel:v:76:y:2015:i:c:p:263-279
    DOI: 10.1016/j.worlddev.2015.07.008
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    Keywords

    inequality; poverty; ethnic divide; fiscal incidence; taxes and social spending; Guatemala;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality

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