IDEAS home Printed from https://ideas.repec.org/p/erg/wpaper/1020.html
   My bibliography  Save this paper

The Role of Fiscal Policy in Fighting Poverty and Reducing Inequality in Iran: An Application of the Commitment to Equity (CEQ) Framework

Author

Listed:
  • Ali Enami
  • Nora Lustig

    () (Tulane University)

  • Alireza Taqdiri

Abstract

This paper evaluates the role of fiscal system in Iran in reducing poverty and inequality. We employ the marginal contribution approach in which the effect of each component of the system is evaluated by comparing the current system to the counter factual of removing that component from the system. Using the CEQ framework, we show that the fiscal system as a whole reduces inequality and poverty significantly by about 16% and 63% respectively. We find that the main driver of this effect is the Targeted Subsidy Program (implemented in 2010) that eliminated the energy subsidies and substituted them with a nominal cash transfer to every Iranian. We show that the effect of this program on reducing inequality and poverty is about 10% and 64% respectively. The main reduction in poverty comes from the rural areas where this program reduces the poverty headcount index from 37% to 17% comparing to the 5% reduction in the urban areas. Given the success of this program in reaching the bottom deciles of the income distribution and reducing inequality and poverty, we recommend that the current plans of Iranian government in eliminating the subsidy of the top deciles is combined with the allocation of some of the freed funds to the bottom deciles.

Suggested Citation

  • Ali Enami & Nora Lustig & Alireza Taqdiri, 2016. "The Role of Fiscal Policy in Fighting Poverty and Reducing Inequality in Iran: An Application of the Commitment to Equity (CEQ) Framework," Working Papers 1020, Economic Research Forum, revised Jun 2016.
  • Handle: RePEc:erg:wpaper:1020
    as

    Download full text from publisher

    File URL: http://erf.org.eg/wp-content/uploads/2016/06/1020.pdf
    Download Restriction: no

    File URL: http://bit.ly/29hDf6k
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jon Jellema & Nora Lustig & Astrid Haas & Sebastian Wolf, 2016. "The Impact of Taxes, Transfers, and Subsidies on Inequality and Poverty in Uganda," Commitment to Equity (CEQ) Working Paper Series 53, Tulane University, Department of Economics.
    2. Nora Lustig, 2016. "Commitment to Equity Handbook. A Guide to Estimating the Impact of Fiscal Policy on Inequality and Poverty," Commitment to Equity (CEQ) Working Paper Series 01, Tulane University, Department of Economics.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:erg:wpaper:1020. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sherine Ghoneim). General contact details of provider: http://edirc.repec.org/data/erfaceg.html .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.