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The Impact of Taxes and Social Spending on Inequality and Poverty in El Salvador - Working Paper 447

Author

Listed:
  • Margarita Beneke
  • Nora Lustig
  • José Andrés Oliva

Abstract

We conducted a fiscal impact study to estimate the effect of taxes, social spending, and subsidies on inequality and poverty in El Salvador, using the methodology of the Commitment to Equity project. Taxes are progressive, but given their volume, their impact is limited. Direct transfers are concentrated on poor households, but their budget is small so their effect is limited; a significant portion of the subsidies goes to households in the upper income deciles, so although their budget is greater, their impact is low. The component that has the greatest effect on inequality is spending on education and health. Therefore, the impact of fiscal policy is limited and low when compared with other countries with a similar level of per capita income. There is room for improvement using current resources.

Suggested Citation

  • Margarita Beneke & Nora Lustig & José Andrés Oliva, 2017. "The Impact of Taxes and Social Spending on Inequality and Poverty in El Salvador - Working Paper 447," Working Papers 447, Center for Global Development.
  • Handle: RePEc:cgd:wpaper:447
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    Keywords

    fiscal incidence; poverty; inequality; El Salvador;

    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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