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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
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    References listed on IDEAS

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    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.
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    5. Lustig Nora, 2016. "Inequality and Fiscal Redistribution in Middle Income Countries: Brazil, Chile, Colombia, Indonesia, Mexico, Peru and South Africa," Journal of Globalization and Development, De Gruyter, vol. 7(1), pages 17-60, June.
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    Cited by:

    1. Ali Enami & Ugo Gentilini & Patricio Larroulet & Nora Lustig & Emma Monsalve & Siyu Quan & Jamele Rigolini, 2021. "Universal Basic Income Programs: How Much Would Taxes Need to Rise? Evidence for Brazil, Chile, India, Russia, and South Africa," Commitment to Equity (CEQ) Working Paper Series 112, Tulane University, Department of Economics.
    2. Ali Enami & Ugo Gentilini & Patricio Larroulet & Nora Lustig & Emma Monsalve & Siyu Quan & Jamele Rigolini, 2021. "Universal Basic Income Programs: How Much Would Taxes Need to Rise? Evidence for Brazil, Chile, India, Russia, and South Africa," Working Papers 582, ECINEQ, Society for the Study of Economic Inequality.

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    More about this item

    Keywords

    fiscal policy; fiscal incidence; social spending; inequality; poverty; taxes; Russia;
    All these keywords.

    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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