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On the Middle 70%. The Impact of Fiscal Policy on the Emerging Middle Class in Latin America usting Commitment to Equity

Author

Listed:
  • Christian Daude

    (Development Bank of Latin America - CAF)

  • Nora Lustig

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

  • Angel Melguizo

    (OECD Development Centre)

  • Jose Ramon Perea

    (World Bank)

Abstract

This paper analyzes the effects of indirect and direct taxes, as well as monetary and in-kind transfers on the income distribution in nine Latin American countries applying the CEQ methodology and using household and expenditure microdata around 2010. In particular, we focus on the effect of fiscal policies on two groups of the emerging middle class: the vulnerable and the middle class. We find that while the vulnerable tend to be net receivers in fiscal terms, especially when including in-kind transfers, the middle class seems to be mainly a net payer. This might be aggravated by the perception of a relatively low quality of in-kind transfers, notably in education and health-care services. We provide some evidence based on subjective surveys pointing in this direction.

Suggested Citation

  • Christian Daude & Nora Lustig & Angel Melguizo & Jose Ramon Perea, 2017. "On the Middle 70%. The Impact of Fiscal Policy on the Emerging Middle Class in Latin America usting Commitment to Equity," Commitment to Equity (CEQ) Working Paper Series 72, Tulane University, Department of Economics.
  • Handle: RePEc:tul:ceqwps:72
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    References listed on IDEAS

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    3. Bussolo, Maurizio & Maliszewska, Maryla & Murard, Elie, 2014. "The long-awaited rise of the middle class in Latin America is finally happening," Policy Research Working Paper Series 6912, The World Bank.
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    7. 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: Introduction to the Special Issue," Public Finance Review, , vol. 42(3), pages 287-303, May.
    8. Nora Lustig & Carola Pessino & John Scott, 2013. "The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico, Peru and Uruguay: An Overview," Working Papers 1313, Tulane University, Department of Economics.
    9. Roberto Angulo & Alejandro Gaviria Uribe & Liliana Morales, 2014. "La década ganada: evolución de la clase media, la pobreza y la vulnerabilidad en Colombia 2002-2011," Coyuntura Económica, Fedesarrollo, June.
    10. Nora Lustig & Sean Higgins, 2012. "Fiscal Incidence, Fiscal Mobility and the Poor: A New Approach," Working Papers 1202, Tulane University, Department of Economics.
    11. -, 2016. "Latin American Economic Outlook 2017: Youth, Skills and Entrepreneurship," Coediciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 40722 edited by Eclac.
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    15. Melguizo, Angel & Bosch, Mariano & Pages, Carmen, 2017. "Better pensions, better jobs: status and alternatives toward universal pension coverage in Latin America and the Caribbean," Journal of Pension Economics and Finance, Cambridge University Press, vol. 16(2), pages 121-143, April.
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    Cited by:

    1. Haydeeliz Carrasco & Hamidou Jawara & Moritz Meyer, 2022. "The Effects Of Fiscal Policy On Inequality And Poverty In The Gambia," Commitment to Equity (CEQ) Working Paper Series 117, Tulane University, Department of Economics.
    2. Eric Rougier & Jean‐Philippe Berrou & Matthieu Clément & François Combarnous & Dominique Darbon, 2021. "Should we call it a (middle) class? A socio‐economic exploration of the Vietnamese middle‐income group," Journal of International Development, John Wiley & Sons, Ltd., vol. 33(8), pages 1321-1345, November.

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    More about this item

    Keywords

    middle class; tax-benefit analysis; fiscal incidence; fiscal mobility;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General

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