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The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico, Peru, and Uruguay

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  • Nora Lustig

    () (Department of Economics, Stone Center for Latin American Studies and Center for Inter-American Policy and Research (CIPR), Tulane University, New Orleans, LA, USA)

  • Carola Pessino

    (Department of Economics, Universidad del CEMA, Buenos Aires, Argentina)

  • John Scott

    (Department of Economics, Centro de Investigación y Docencia Económicas (CIDE), Mexico City, Mexico)

Abstract

How much redistribution and poverty reduction is being accomplished in Latin America through social spending, subsidies, and taxes? Standard fiscal incidence analyses applied to Argentina, Bolivia, Brazil, Mexico, Peru, and Uruguay using a comparable methodology yields the following results. Direct taxes and cash transfers reduce inequality and poverty by nontrivial amounts in Argentina, Brazil, and Uruguay but less so in Bolivia, Mexico, and Peru. While direct taxes are progressive, the redistributive impact is small because direct taxes as a share of GDP are generally low. Cash transfers are quite progressive in absolute terms, except in Bolivia where programs are not targeted to the poor. In Bolivia and Brazil, indirect taxes more than offset the poverty-reducing impact of cash transfers. When one includes the in-kind transfers in education and health, valued at government costs, they reduce inequality in all countries by considerably more than cash transfers, reflecting their relative size.

Suggested Citation

  • Nora Lustig & Carola Pessino & John Scott, 2014. "The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico, Peru, and Uruguay," Public Finance Review, , vol. 42(3), pages 287-303, May.
  • Handle: RePEc:sae:pubfin:v:42:y:2014:i:3:p:287-303
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    References listed on IDEAS

    as
    1. Marisa Bucheli & Nora Lustig & Máximo Rossi & Florencia Amábile, 2014. "Social Spending, Taxes, and Income Redistribution in Uruguay," Public Finance Review, , vol. 42(3), pages 413-433, May.
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    fiscal incidence; inequality; poverty; taxes; social spending; Latin America;

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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