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

Author

Listed:
  • Nora Lustig

    (Stone Center for Latin American Studies, Department of Economics, Tulane University, Commitment to Equity Institute (CEQI).)

  • Florencia Amábile
  • Marisa Bucheli
  • George Gray Molina
  • Sean Higgins
  • Miguel Jaramillo
  • Wilson Jiménez Pozo
  • Veronica Paz Arauco
  • Claudiney Pereira
  • Carola Pessino
  • Máximo Rossi
  • John Scott
  • Ernesto Yáñez Aguilar

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," Commitment to Equity (CEQ) Working Paper Series 13, Tulane University, Department of Economics, revised Aug 2013.
  • Handle: RePEc:tul:ceqwps:13
    as

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    File URL: http://repec.tulane.edu/RePEc/ceq/ceq13.pdf
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    References listed on IDEAS

    as
    1. 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.
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    17. Vito Tanzi, 2013. "Tax reform in Latin America: a long term assessment," Commitment to Equity (CEQ) Working Paper Series 15, Tulane University, Department of Economics.
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    23. 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 1307, Tulane University, Department of Economics, revised May 2013.
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    26. John Scott, 2013. "Redistributive Impact and Efficiency of Mexico's Fiscal System," Commitment to Equity (CEQ) Working Paper Series 1308, Tulane University, Department of Economics, revised Jul 2013.
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    More about this item

    Keywords

    fiscal incidence; inequality; poverty; taxes; social spending; Latin America;
    All these keywords.

    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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