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Fiscal policy, inequality and the poor in the developing world

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  • Nora Lustig

    (Tulane University, U.S.A.)

Abstract

Using comparable fiscal incidence analysis, this paper examines the impact of fiscal policy on inequality and poverty in twenty-five countries for around 2010. Success in fiscal redistribution is driven primarily by redistributive effort (share of social spending to GDP in each country) and the extent to which transfers/subsidies are targeted to the poor and direct taxes targeted to the rich. While fiscal policy always reduces inequality, this is not the case with poverty. Fiscal policy increases poverty in four countries using US\$1.25/day PPP poverty line, in 8 countries using US\$2.50/day line, and 15 countries using the US\$4/day line (over and above market income poverty). While spending on pre-school and primary school is pro-poor (i.e., the per capita transfer declines with income) in almost all countries, pro-poor secondary school spending is less prevalent, and tertiary education spending tends to be progressive only in relative terms (i.e., equalizing but not pro-poor). Health spending is always equalizing except for Jordan.

Suggested Citation

  • Nora Lustig, 2016. "Fiscal policy, inequality and the poor in the developing world," Working Papers 418, ECINEQ, Society for the Study of Economic Inequality.
  • Handle: RePEc:inq:inqwps:ecineq2016-418
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    File URL: http://www.ecineq.org/milano/WP/ECINEQ2016-418.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Fiscal Policy, Inequality and the Poor in the Developing World
      by maximorossi in NEP-LTV blog on 2016-10-19 19:25:05

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    Cited by:

    1. Hyojung Kang & Jorge Martinez‐Vazquez, 2022. "When does foreign direct investment lead to inclusive growth?," The World Economy, Wiley Blackwell, vol. 45(8), pages 2394-2427, August.
    2. Meng Cai & Jing Xu, 2022. "Evaluating the Redistributive Effect of Social Security Programs in China over the Past 30 Years," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 30(1), pages 58-81, January.
    3. Sèna Kimm Gnangnon, 2021. "Exchange rate pressure, fiscal redistribution and poverty in developing countries," Economic Change and Restructuring, Springer, vol. 54(4), pages 1173-1203, November.
    4. Haydeeliz Carrasco & Hamidou Jawara & Moritz Meyer, 2022. "The Effects Of Fiscal Policy On Inequality And Poverty In The Gambia," Commitment to Equity (CEQ) Working Paper Series 117, Tulane University, Department of Economics.
    5. Markina Oksana, 2022. "Taxation, Inequality, and Poverty: Evidence from Ukraine," Central European Economic Journal, Sciendo, vol. 9(56), pages 1-18, January.
    6. Bargain, Olivier & Jara Tamayo, Holguer Xavier & Magejo, Prudence & Benhura, Miracle, 2018. "Learning from the," IZA Discussion Papers 12017, Institute of Labor Economics (IZA).
    7. Georgeta Vidican Auktor & Markus Loewe, 2022. "Subsidy Reform and the Transformation of Social Contracts: The Cases of Egypt, Iran and Morocco," Social Sciences, MDPI, vol. 11(2), pages 1-22, February.
    8. Jon Jellema & Matthew Wai-Poi & Rythia Afkar, 2017. "The Distributional Impact of Fiscal Policy in Indonesia," Commitment to Equity (CEQ) Working Paper Series 40, Tulane University, Department of Economics.
    9. Gautam Negi, 2021. "Fiscal Impulse And Sectoral Output €“ Evidence From Indian States," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 28, pages 151-167, December.

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    More about this item

    Keywords

    fiscal incidence; social spending; inequality; poverty; Developing Countries.;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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