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The impact of taxes and social spending on inequality and poverty in Argentina, Bolivia, Brazil, Mexico, Peru and Uruguay: An overview

Author

Listed:
  • Nora Lustig

    (Tulane University and Center for Global Development and Inter-American Dialogue.)

  • Florencia Amábile

    (Affilitation available at www.commitmentoequity.org)

  • Marisa Bucheli

    (Affilitation available at www.commitmentoequity.org)

  • George Gray Molina

    (Affilitation available at www.commitmentoequity.org)

  • Sean Higgins

    (Affilitation available at www.commitmentoequity.org)

  • Miguel Jaramillo

    (Affilitation available at www.commitmentoequity.org)

  • Wilson Jiménez Pozo

    (Affilitation available at www.commitmentoequity.org)

  • Veronica Paz Arauco

    (Affilitation available at www.commitmentoequity.org)

  • Claudiney Pereira

    (Affilitation available at www.commitmentoequity.org)

  • Carola Pessino

    (Affilitation available at www.commitmentoequity.org)

  • Máximo Rossi

    (Affilitation available at www.commitmentoequity.org)

  • John Scott

    (Affilitation available at www.commitmentoequity.org)

  • Ernesto Yáñez Aguilar

    (Affilitation available at www.commitmentoequity.org)

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 & 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.
  • Handle: RePEc:inq:inqwps:ecineq2013-315
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    References listed on IDEAS

    as
    1. Lustig, Nora & Lopez-Calva, Luis F. & Ortiz-Juarez, Eduardo, 2013. "Declining Inequality in Latin America in the 2000s: The Cases of Argentina, Brazil, and Mexico," World Development, Elsevier, vol. 44(C), pages 129-141.
    2. 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.
    3. Marisa Bucheli & Nora Lustig & Máximo Rossi & Florencia Amábile, 2012. "Social Spending, Taxes and Income Redistribution in Uruguay," Documentos de Trabajo (working papers) 1212, Department of Economics - dECON.
    4. Nora Lustig & Carola Pessino & John Scott, 2013. "The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico, Peru and Uruguay: An Overview," Working Papers 1313, Tulane University, Department of Economics.
    5. Sean Higgins & Nora Lustig & Julio Ramirez & Billy Swanson, 2013. "Social Spending, Taxes and Income Redistribution in Paraguay," Working Papers 1311, Tulane University, Department of Economics.
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    8. Jorge Martinez-Vazquez, 2001. "The Impact of Budgets on the Poor: Tax and Benefit," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0110, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
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    11. Kakwani, Nanok C, 1977. "Measurement of Tax Progressivity: An International Comparison," Economic Journal, Royal Economic Society, vol. 87(345), pages 71-80, March.
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    13. Francisco H.G. Ferreira & Julian Messina & Jamele Rigolini & Luis-Felipe López-Calva & Maria Ana Lugo & Renos Vakis, 2013. "Economic Mobility and the Rise of the Latin American Middle Class
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    15. Sean Higgins & Claudiney Pereira, 2014. "The Effects of Brazil’s Taxation and Social Spending on the Distribution of Household Income," Public Finance Review, , vol. 42(3), pages 346-367, May.
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    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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