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The effects of Brazil's high taxation and social spending on the distribution of household income

Author

Listed:
  • Sean Higgins

    (Department of Economics, Tulane University)

  • Claudiney Pereira

    (Department of Economics, Tulane University)

Abstract

Relative to other countries in Latin America, Brazil has high rates of taxation and large social spending. We estimate the redistributive effect of fiscal policy on income distribution and poverty in Brazil using household survey data that contain detailed information about many labor and non-labor income sources, direct taxes paid, contributions to the pension system, transfers received, use of public education and health services, and consumption. The rich detail of our data set allows us to single out the effects of each direct tax and transfer without simulating taxes or benefits. On the spending side, we find that although Brazil has some well-targeted anti-poverty programs, a large portion of direct transfer beneficiaries are non-poor and inequality and poverty reduction are low relative to Brazil’s spending. On the tax side, indirect taxes paid by the poor often surpass the benefits they receive.

Suggested Citation

  • Sean Higgins & Claudiney Pereira, 2013. "The effects of Brazil's high taxation and social spending on the distribution of household income," Commitment to Equity (CEQ) Working Paper Series 07, Tulane University, Department of Economics, revised May 2013.
  • Handle: RePEc:tul:ceqwps:07
    as

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    File URL: http://repec.tulane.edu/RePEc/ceq/ceq07.pdf
    File Function: Revised version, 2013
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    References listed on IDEAS

    as
    1. Lustig, Nora & Gray Molina, George & Higgins, Sean & Jaramillo, Miguel & Jiménez, Wilson & Paz, Verónica & Pereira, Claudiney & Pessino, Carola & Scott, John & Yáñez, Ernesto, 2012. "The impact of taxes and social spending on inequality and poverty in Argentina, Bolivia, Brazil, Mexico and Peru: a synthesis of results," Research Department working papers 234, CAF Development Bank Of Latinamerica.
    2. Ferreira, Francisco H. G. & Leite, Phillippe G. & Litchfield, Julie A., 2008. "The Rise And Fall Of Brazilian Inequality: 1981–2004," Macroeconomic Dynamics, Cambridge University Press, vol. 12(S2), pages 199-230, September.
    3. Owen O'Donnell & Eddy van Doorslaer & Adam Wagstaff & Magnus Lindelow, 2008. "Analyzing Health Equity Using Household Survey Data : A Guide to Techniques and Their Implementation," World Bank Publications, The World Bank, number 6896.
    4. Cecilia García‐Peñalosa & Stephen J. Turnovsky, 2011. "Taxation and Income Distribution Dynamics in a Neoclassical Growth Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(8), pages 1543-1577, December.
    5. Nora Lustig & Carola Pessino & John Scott, 2014. "The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico, Peru, and Uruguay," Public Finance Review, , vol. 42(3), pages 287-303, May.
    6. John Scott, 2014. "Redistributive Impact and Efficiency of Mexico’s Fiscal System," Public Finance Review, , vol. 42(3), pages 368-390, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    fiscal policy; poverty; inequality; Brazil;

    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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