IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp4511.html
   My bibliography  Save this paper

Pro-Poor Tax Reforms, with an Application to Mexico

Author

Listed:
  • Duclos, Jean-Yves

    (Université Laval)

  • Makdissi, Paul

    (University of Ottawa)

  • Araar, Abdelkrim

    (Université Laval)

Abstract

This paper proposes a methodology for testing for whether tax reforms are pro-poor. This is done by extending stochastic dominance techniques to help identify tax reforms that will necessarily be deemed absolutely or relatively pro-poor by a wide spectrum of poverty analysts. The statistical properties of the various estimators are also derived in order to make the method implementable using survey data. The methodology is used to assess the pro-poorness of possible reforms to Mexico's indirect tax system. This leads to the identification of several possible pro-poor tax reforms in that country. It also shows how the pro-poorness of a tax reform depends on one's conception of poverty as well as on the revenue and efficiency impact of the reform.

Suggested Citation

  • Duclos, Jean-Yves & Makdissi, Paul & Araar, Abdelkrim, 2009. "Pro-Poor Tax Reforms, with an Application to Mexico," IZA Discussion Papers 4511, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp4511
    as

    Download full text from publisher

    File URL: https://ftp.iza.org/dp4511.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Wildasin, David E, 1984. "On Public Good Provision with Distortionary Taxation," Economic Inquiry, Western Economic Association International, vol. 22(2), pages 227-243, April.
    2. Dollar, David & Kraay, Aart, 2002. "Growth Is Good for the Poor," Journal of Economic Growth, Springer, vol. 7(3), pages 195-225, September.
    3. Alessandro Santoro, 2007. "Marginal Commodity Tax Reforms: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 21(4), pages 827-848, September.
    4. Russell Davidson & Jean-Yves Duclos, 2013. "Testing for Restricted Stochastic Dominance," Econometric Reviews, Taylor & Francis Journals, vol. 32(1), pages 84-125, January.
    5. Paolo Liberati, 2003. "Poverty Reducing Reforms and Subgroup Consumption Dominance Curves," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 49(4), pages 589-601, December.
    6. Ahmad, Ehtisham & Stern, Nicholas, 1984. "The theory of reform and indian indirect taxes," Journal of Public Economics, Elsevier, vol. 25(3), pages 259-298, December.
    7. Pernia, Ernesto & Kakwani, Nanak, 2000. "What is Pro-poor Growth?," MPRA Paper 104987, University Library of Munich, Germany.
    8. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-766, May.
    9. Kolm, Serge-Christophe, 1976. "Unequal inequalities. II," Journal of Economic Theory, Elsevier, vol. 13(1), pages 82-111, August.
    10. Satya R. Chakravarty, 2019. "Ethically Flexible Measures of Poverty," Themes in Economics, in: Satya R. Chakravarty (ed.), Poverty, Social Exclusion and Stochastic Dominance, pages 13-26, Springer.
    11. Ravallion, Martin, 2001. "Growth, Inequality and Poverty: Looking Beyond Averages," World Development, Elsevier, vol. 29(11), pages 1803-1815, November.
    12. Hardle, Wolfgang & Linton, Oliver, 1986. "Applied nonparametric methods," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 38, pages 2295-2339, Elsevier.
    13. Kolm, Serge-Christophe, 1976. "Unequal inequalities. I," Journal of Economic Theory, Elsevier, vol. 12(3), pages 416-442, June.
    14. Alessandro Santoro, 2005. "Marginal commodity tax reforms: a survey," Public Economics 0508017, University Library of Munich, Germany.
    15. Jean-Yves Duclos, 2009. "What is “Pro-Poor”?," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 32(1), pages 37-58, January.
    16. Jean-Yves Duclos & Paul Makdissi & Quentin Wodon, 2008. "Socially Improving Tax Reforms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(4), pages 1505-1537, November.
    17. Makdissi, Paul & Wodon, Quentin, 2002. "Consumption dominance curves: testing for the impact of indirect tax reforms on poverty," Economics Letters, Elsevier, vol. 75(2), pages 227-235, April.
    18. Ravallion, Martin & Chen, Shaohua, 2003. "Measuring pro-poor growth," Economics Letters, Elsevier, vol. 78(1), pages 93-99, January.
    19. Yitzhaki, Shlomo & Slemrod, Joel, 1991. "Welfare Dominance: An Application to Commodity Taxation," American Economic Review, American Economic Association, vol. 81(3), pages 480-496, June.
    20. Besley, Timothy J & Kanbur, S M Ravi, 1988. "Food Subsidies and Poverty Alleviation," Economic Journal, Royal Economic Society, vol. 98(392), pages 701-719, September.
    21. Yitzhaki, Shlomo & Thirsk, Wayne, 1990. "Welfare dominance and the design of excise taxation in the Cote d'ivoire," Journal of Development Economics, Elsevier, vol. 33(1), pages 1-18, July.
    22. Jean‐Yves Duclos & Paul Makdissi, 2004. "Restricted and Unrestricted Dominance for Welfare, Inequality, and Poverty Orderings," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(1), pages 145-164, February.
    23. Essama-Nssah, B., 2005. "A unified framework for pro-poor growth analysis," Economics Letters, Elsevier, vol. 89(2), pages 216-221, November.
    24. Mayshar, Joram & Yitzhaki, Shlomo, 1996. "Dalton-improving tax reform: When households differ in ability and needs," Journal of Public Economics, Elsevier, vol. 62(3), pages 399-412, November.
    25. Clark, Stephen & Hemming, Richard & Ulph, David, 1981. "On Indices for the Measurement of Poverty," Economic Journal, Royal Economic Society, vol. 91(362), pages 515-526, June.
    26. Hardle, Wolfgang & Linton, Oliver, 1986. "Applied nonparametric methods," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 38, pages 2295-2339, Elsevier.
    27. Son, Hyun Hwa, 2004. "A note on pro-poor growth," Economics Letters, Elsevier, vol. 82(3), pages 307-314, March.
    28. Fishburn, Peter C. & Willig, Robert D., 1984. "Transfer principles in income redistribution," Journal of Public Economics, Elsevier, vol. 25(3), pages 323-328, December.
    29. Ravallion, Martin & Datt, Gaurav, 2002. "Why has economic growth been more pro-poor in some states of India than others?," Journal of Development Economics, Elsevier, vol. 68(2), pages 381-400, August.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. David Madden, 2015. "The Poverty Effects Of A ‘Fat‐Tax’ In Ireland," Health Economics, John Wiley & Sons, Ltd., vol. 24(1), pages 104-121, January.
    2. Abdelkrim Araar & Jean‐Yves Duclos & Mathieu Audet & Paul Makdissi, 2009. "Testing For Pro‐Poorness Of Growth, With An Application To Mexico," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(4), pages 853-881, December.
    3. Wasiu Adekunle Are, 2012. "Poverty-Reducing Directions of Indirect Marginal Tax Reforms in Ireland," Working Papers 201230, School of Economics, University College Dublin.
    4. Makdissi Paul & Seif Edine Mohamad, 2020. "Is the Elimination of Food Subsidies the Right Policy to Address Lebanon’s Public Finance Crisis?," Review of Middle East Economics and Finance, De Gruyter, vol. 16(2), pages 1-17, August.
    5. Luis Huesca & Arturo Robles Valencia & Abdelkrim Araar, 2015. "Progressivity and decomposition of VAT in the Mexican border, 2014," Estudios Regionales en Economía, Población y Desarrollo. Cuadernos de Trabajo de la Universidad Autónoma de Ciudad Juárez. 25, Cuerpo Académico 41 de la Universidad Autónoma de Ciudad Juárez, revised 01 Jan 2015.

    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. Jean-Yves Duclos & Paul Makdissi & Abdelkrim Araar, 2014. "Pro-poor indirect tax reforms, with an application to Mexico," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(1), pages 87-118, February.
    2. Jean-Yves Duclos & Paul Makdissi & Quentin Wodon, 2008. "Socially Improving Tax Reforms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(4), pages 1505-1537, November.
    3. Higgins, Sean & Lustig, Nora, 2016. "Can a poverty-reducing and progressive tax and transfer system hurt the poor?," Journal of Development Economics, Elsevier, vol. 122(C), pages 63-75.
    4. Makdissi, Paul & Mussard, Stéphane, 2006. "Between-Group Transfers and Poverty-Reducing Tax Reforms," IRISS Working Paper Series 2006-10, IRISS at CEPS/INSTEAD.
    5. Jean‐Yves Duclos & Paul Makdissi & Quentin Wodon, 2005. "Poverty‐Reducing Tax Reforms with Heterogeneous Agents," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(1), pages 107-116, February.
    6. Sean Higgins & Nora Lustig, 2015. "Can Poverty-Reducing and Progressive Tax and Transfer System Hurt the Poor?," Commitment to Equity (CEQ) Working Paper Series 1333, Tulane University, Department of Economics.
    7. Saikou Amadou Diallo & Paul Makdissi, 2008. "Est-ce que les subsides d'électricité diminuent la pauvreté en Guinée ?," Working Papers 0811E, University of Ottawa, Department of Economics.
    8. Abdelkrim Araar & Jean‐Yves Duclos & Mathieu Audet & Paul Makdissi, 2009. "Testing For Pro‐Poorness Of Growth, With An Application To Mexico," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(4), pages 853-881, December.
    9. Jean-Yves Duclos, 2009. "What is “Pro-Poor”?," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 32(1), pages 37-58, January.
    10. Paul Makdissi & Stéphane Mussard, 2008. "Analyzing the impact of indirect tax reforms on rank-dependent social welfare functions: a positional dominance approach," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 30(3), pages 385-399, April.
    11. Valentini, Edilio, 2015. "Indirect taxation, public pricing and price cap regulation: A synthesis," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW), vol. 9, pages 1-39.
    12. Wasiu Adekunle Are, 2012. "Poverty-Reducing Directions of Indirect Marginal Tax Reforms in Ireland," Working Papers 201230, School of Economics, University College Dublin.
    13. Abdelkrim Araar & Jean-Yves Duclos, 2007. "Poverty and Inequality Components: a Micro Framework," Cahiers de recherche 0735, CIRPEE.
    14. Duclos, Jean-Yves & Makdissi, Paul & Wodon, Quentin, 2002. "Socially-Efficient Tax Reforms," Cahiers de recherche 0201, Université Laval - Département d'économique.
    15. Klasen, Stephan, 2008. "Economic Growth and Poverty Reduction: Measurement Issues using Income and Non-Income Indicators," World Development, Elsevier, vol. 36(3), pages 420-445, March.
    16. Mario Fortin & Andre Leclerc & Jean-Baptiste Nesmy, 2006. "L’impact des opérations transactionnelles sur la croissance de la productivité dans le secteur bancaire," Cahiers de recherche 06-01, Departement d'Economique de l'École de gestion à l'Université de Sherbrooke.
    17. Duclos, Jean-Yves & Makdissi, Paul & Wodon, Quentin, 2005. "Poverty-dominant program reforms: the role of targeting and allocation rules," Journal of Development Economics, Elsevier, vol. 77(1), pages 53-73, June.
    18. Garcia-Diaz, Rocio & Sosa-Rub, Sandra G., 2011. "Analysis of the distributional impact of out-of-pocket health payments: Evidence from a public health insurance program for the poor in Mexico," Journal of Health Economics, Elsevier, vol. 30(4), pages 707-718, July.
    19. Alessandro Santoro, 2005. "Marginal commodity tax reforms: a survey," Public Economics 0508017, University Library of Munich, Germany.
    20. Ali Hashemi, 2016. "Measuring Pro-Poor Growth in Egypt, Jordan, and Palestine," Working Papers 1008, Economic Research Forum, revised Jun 2016.

    More about this item

    Keywords

    stochastic dominance; tax reforms; pro-poor changes; Mexico;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

    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:iza:izadps:dp4511. 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: . General contact details of provider: https://edirc.repec.org/data/izaaade.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.

    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: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    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.