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Who Benefits from Fiscal Redistribution in the Russian Federation?

Author

Listed:
  • Luis F. Lopez-Calva

    (World Bank)

  • Nora Lustig

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

  • Mikhail Matytsin

    (World Bank)

  • Daria Popova

    (World Bank)

Abstract

This paper shows that the system of taxes and transfers in Russia has a limited redistributive capacity vertically (among different income groups)—particularly when pensions are assumed to be deferred income—though it does achieve significant horizontal redistribution (among sociodemographic groups). The main results of the analysis, concern the Russian fiscal system’s limited redistributive effect,low effectiveness in poverty reduction, and relatively poor net financial impact on all demographic groups except pensioners. Firstly, benchmarking shows that the Russian system of direct taxes and transfers does not compare well with countries that achieve larger redistribution, in particular European Union countries. Secondly,net direct taxes (incorporated into disposable income) are always equalizing, but net indirect taxes (incorporated into consumable income) are unequalizing in both the benchmark and the sensitivity analysis scenarios. Thirdly, under the benchmark scenario, the net effect of the fiscal system is actually poverty increasing. Finally, it appears that all households of working-age people with and without children are net payers under the Russian fiscal system, while only pensioners’ households benefit from the fiscal redistribution in Russia under both scenarios. The main conclusion that emerges from this analysis is that there are both equity and efficiency reasons to review the tax and social spending structure. Such an exercise may require, however, a good understanding of the political economy of a potential reform.

Suggested Citation

  • Luis F. Lopez-Calva & Nora Lustig & Mikhail Matytsin & Daria Popova, 2017. "Who Benefits from Fiscal Redistribution in the Russian Federation?," Commitment to Equity (CEQ) Working Paper Series 39, Tulane University, Department of Economics.
  • Handle: RePEc:tul:ceqwps:39
    as

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    File URL: http://repec.tulane.edu/RePEc/ceq/ceq39.pdf
    File Function: First version, 2017
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    References listed on IDEAS

    as
    1. Branko Milanovic, 1999. "Explaining the increase in inequality during transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(2), pages 299-341, July.
    2. Daria Popova, 2013. "Impact assessment of alternative reforms of Child Allowances using RUSMOD – the static tax-benefit microsimulation model for Russia," International Journal of Microsimulation, International Microsimulation Association, vol. 1(6), pages 122-156.
    3. Miguel Jaramillo, 2014. "The Incidence of Social Spending and Taxes in Peru," Public Finance Review, , vol. 42(3), pages 391-412, May.
    4. Branko Milanovic & Sean Higgins & Nora Lustig & Whitney Ruble & Timothy M. Smeeding, 2016. "Comparing the Incidence of Taxes and Social Spending in Brazil and the United States," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62, pages 22-46, August.
    5. Duncan, Denvil, 2014. "Behavioral responses and the distributional effects of the Russian ‘flat’ tax," Journal of Policy Modeling, Elsevier, vol. 36(2), pages 226-240.
    6. Irina Denisova & Stanislav Kolenikov & Ksenia Yudaeva, 2000. "Child Benefits and Child Poverty," Working Papers w0006, Center for Economic and Financial Research (CEFIR).
    7. Cancho, Cesar & Davalos, Maria E. & Demarchi, Giorgia & Meyer, Moritz & Sanchez Paramo, Carolina, 2015. "Economic mobility in Europe and Central Asia : exploring patterns and uncovering puzzles," Policy Research Working Paper Series 7173, The World Bank.
    8. 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.
    9. John Scott, 2014. "Redistributive Impact and Efficiency of Mexico’s Fiscal System," Public Finance Review, , vol. 42(3), pages 368-390, May.
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    More about this item

    Keywords

    fiscal policy; fiscal incidence; social spending; inequality; poverty; taxes; Russia;

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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