IDEAS home Printed from https://ideas.repec.org/p/cgd/wpaper/311.html
   My bibliography  Save this paper

The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico, and Peru: A Synthesis of Results

Author

Listed:
  • Nora Lustig, George Gray-Molina, Sean Higgins, Miguel Jaramillo, Wilson Jiménez, Veronica Paz, Claudiney Pereira, Carola Pessino, John Scott, and Ernesto Yañez

Abstract

We apply a standard tax-and-benefit-incidence analysis to estimate the impact on inequality and poverty of direct taxes, indirect taxes and subsidies, and social spending (cash and food transfers and in-kind transfers in education and health). The extent of inequality reduction induced by direct taxes and transfers is rather small (2 percentage points on average), especially when compared with that found in Western Europe (15 percentage points on average). What prevents Argentina, Bolivia, and Brazil from achieving similar reductions in inequality is not the lack of revenues but the fact that they spend less on cash transfers—especially transfers that are prog ressive in absolute terms—as a share of GDP. Indirect taxes result in that net contributors to the fiscal system start at the fourth, third, and even second decile on average, depending on the country. When in-kind transfers in education and health are added, however, the bottom six deciles are net recipients. The impact of transfers on inequality and poverty reduction could be higher if spending on direct cash transfers that are progressive in absolute terms were increased, leakages to the nonpoor reduced, and coverage of the extreme poor by direct transfer programs expanded.

Suggested Citation

  • Nora Lustig, George Gray-Molina, Sean Higgins, Miguel Jaramillo, Wilson Jiménez, Veronica Paz, Claudiney Pereira, Carola Pessino, John Scott, and Ernesto Yañez, 2012. "The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico, and Peru: A Synthesis of Results," Working Papers 311, Center for Global Development.
  • Handle: RePEc:cgd:wpaper:311
    as

    Download full text from publisher

    File URL: http://www.cgdev.org/files/1426706_file_Lustig_et_al_Impact_of_Taxes.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Nora Lustig & George Gray Molina & Sean Higgins & Miguel Jaramillo & Wilson Jimenez & Veronica Paz & Claudiney Pereira & Carola Pessino & John Scott & Ernesto Yanez, 2012. "The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico and Peru: A Synthesis of Results," Working Papers 1216, Tulane University, Department of Economics.
    2. repec:idb:brikps:62678 is not listed on IDEAS
    3. Owen O'Donnell & Eddy van Doorslaer & Adam Wagstaff & Magnus Lindelow, 2008. "Analyzing Health Equity Using Household Survey Data : A Guide to Techniques and Their Implementation," World Bank Publications - Books, The World Bank Group, number 6896, December.
    4. Nora Lustig & George Gray Molina & Sean Higgins & Miguel Jaramillo & Wilson Jimenez & Veronica Paz & Claudiney Pereira & Carola Pessino & John Scott & Ernesto Yanez, 2012. "The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico and Peru: A Synthesis of Results," Working Papers 1216, Tulane University, Department of Economics.
    5. Kakwani, Nanok C, 1977. "Measurement of Tax Progressivity: An International Comparison," Economic Journal, Royal Economic Society, vol. 87(345), pages 71-80, March.
    6. Lambert, Peter J, 1985. "On the Redistributive Effect of Taxes and Benefits," Scottish Journal of Political Economy, Scottish Economic Society, vol. 32(1), pages 39-54, February.
    7. Nora Lustig & Florencia Amabile & Marisa Bucheli & George Gray Molina & Sean Higgins & Miguel Jaramillo & Wilson Jimenez Pozo & Veronica Paz Arauco & Claudiney Pereira & Carola Pessino & Maximo Rossi , 2013. "The Impact of Taxes and Social Spending on Inequality in Argentina, Bolivia, Brazil, Mexico, Peru and Uruguay: An Overview," Working Papers 1316, Tulane University, Department of Economics.
    8. Andrew Barnard, 2009. "The effects of taxes and benefits on household income, 2007/08," Economic & Labour Market Review, Palgrave Macmillan;Office for National Statistics, vol. 3(8), pages 56-66, August.
    9. Ferreira, Francisco H.G. & Ravallion, Martin, 2008. "Global poverty and inequality : a review of the evidence," Policy Research Working Paper Series 4623, The World Bank.
    10. Herwig Immervoll & Horacio Levy & José Ricardo Nogueira & Cathal O´Donoghue & Rozane Bezerra de Siqueira, 2005. "The Impact of Brazil´s Tax-Benefit System on Inequality and Poverty," Ibero America Institute for Econ. Research (IAI) Discussion Papers 117, Ibero-America Institute for Economic Research.
    11. Karla Breceda & Jamele Rigolini & Jaime Saavedra, 2009. "Latin America and the Social Contract: Patterns of Social Spending and Taxation," Population and Development Review, The Population Council, Inc., vol. 35(4), pages 721-748, December.
    12. John Scott, 2014. "Redistributive Impact and Efficiency of Mexico’s Fiscal System," Public Finance Review, , vol. 42(3), pages 368-390, May.
    13. 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: Introduction to the Special Issue," Public Finance Review, , vol. 42(3), pages 287-303, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nora Lustig & Florencia Amábile & Marisa Bucheli & George Gray Molina & Sean Higgins & Miguel Jaramillo & Wilson Jiménez Pozo & Veronica Paz Arauco & Claudiney Pereira & Carola Pessino & Máximo Rossi , 2013. "The impact of taxes and social spending on inequality and poverty in Argentina, Bolivia, Brazil, Mexico, Peru and Uruguay: An overview," Working Papers 315, ECINEQ, Society for the Study of Economic Inequality.
    2. Sean Higgins & Nora Lustig & Whitney Ruble & Timothy M. Smeeding, 2016. "Comparing the Incidence of Taxes and Social Spending in Brazil and the United States," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(S1), pages 22-46, August.
    3. Sean Higgins & Claudiney Pereira, 2013. "The effects of Brazil's high taxation and social spending on the distribution of household income," Commitment to Equity (CEQ) Working Paper Series 07, Tulane University, Department of Economics, revised May 2013.
    4. Nora Lustig, 2013. "Commitment to Equity: Diagnostic Questionnaire," Commitment to Equity (CEQ) Working Paper Series 02, Tulane University, Department of Economics.
    5. Facundo Alveredo & Juliana Londoño Vélez, 2013. "High incomes and personal taxation in a developing economy: Colombia 1993-2010," Commitment to Equity (CEQ) Working Paper Series 12, Tulane University, Department of Economics.
    6. Nora Lustig & Florencia Amábile & Marisa Bucheli & George Gray Molina & Sean Higgins & Miguel Jaramillo & Wilson Jiménez Pozo & Veronica Paz Arauco & Claudiney Pereira & Carola Pessino & Máximo Rossi , 2014. "El impacto del sistema tributario y del gasto social sobre la desigualdad y la pobreza en Argentina, Bolivia, Brasil, México, Perú y Uruguay: Un panorama general," Commitment to Equity (CEQ) Working Paper Series 13S, Tulane University, Department of Economics.
    7. Nora Lustig, 2015. "Fiscal Policy and Ethno-Racial Inequality in Bolivia, Brazil, Guatemala and Uruguay," Commitment to Equity (CEQ) Working Paper Series 22, Tulane University, Department of Economics.
    8. Nora Lustig & Florencia Amábile & Marisa Bucheli & George Gray Molina & Sean Higgins & Miguel Jaramillo & Wilson Jiménez Pozo & Veronica Paz Arauco & Claudiney Pereira & Carola Pessino & Máximo Rossi , 2013. "The impact of taxes and social spending on inequality and poverty in Argentina, Bolivia, Brazil, Mexico, Peru, and Uruguay," Commitment to Equity (CEQ) Working Paper Series 13, Tulane University, Department of Economics, revised Aug 2013.
    9. John Scott, 2013. "Redistributive Impact and Efficiency of Mexico's Fiscal System," Commitment to Equity (CEQ) Working Paper Series 08, Tulane University, Department of Economics, revised Jul 2013.
    10. Nora Lustig & Florencia Amábile & Marisa Bucheli & George Gray Molina & Sean Higgins & Miguel Jaramillo & Wilson Jiménez Pozo & Veronica Paz Arauco & Claudiney Pereira & Carola Pessino & Máximo Rossi , 2013. "The impact of taxes and social spending on inequality and poverty in Argentina, Bolivia, Brazil, Mexico, Peru, and Uruguay," Commitment to Equity (CEQ) Working Paper Series 1313, Tulane University, Department of Economics, revised Aug 2013.
    11. 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.
    12. 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.
    13. Pablo Sauma & Juan Diego Trejos, 2014. "Universidad de Costa Rica," Commitment to Equity (CEQ) Working Paper Series 18E, Tulane University, Department of Economics.
    14. Miguel Jaramillo Baanante, 2013. "The Incidence of Social Spending and Taxes in Peru," Commitment to Equity (CEQ) Working Paper Series 09, Tulane University, Department of Economics.
    15. Vito Tanzi, 2013. "Tax reform in Latin America: a long term assessment," Commitment to Equity (CEQ) Working Paper Series 15, Tulane University, Department of Economics.
    16. Verónica Paz Arauco & George Gray Molina & Wilson Jiménez Pozo & Ernesto Yáñez Aguilar, 2012. "Explaining low redistributive impact in Bolivia," Commitment to Equity (CEQ) Working Paper Series 06, Tulane University, Department of Economics, revised Apr 2013.
    17. Margarita Beneke & Nora Lustig, 2015. "El Impacto de los Impuestos y el Gasto Social en la Desigualdad y la Pobreza en El Salvador," Commitment to Equity (CEQ) Working Paper Series 26, Tulane University, Department of Economics.
    18. Sean Higgins, Nora Lustig, Whitney Ruble, and Timothy Smeeding, 2014. "Comparing the Incidence of Taxes and Social Spending in Brazil and the United States - Working Paper 360," Working Papers 360, Center for Global Development.
    19. Luis F. López-Calva & Nora Lustig & John Scott & Andrés Castañeda, 2013. "Gasto social, redistribución del ingreso y reducción de la pobreza en México: evolución y comparación con Argentina, Brasil y Uruguay," Commitment to Equity (CEQ) Working Paper Series 17, Tulane University, Department of Economics, revised Mar 2014.

    More about this item

    Keywords

    fiscal incidence; inequality; poverty; taxes; social spending; Latin America;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cgd:wpaper:311. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Publications Manager (email available below). General contact details of provider: https://edirc.repec.org/data/cgdevus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.