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Fiscal Redistribution, Sustainability, and Demography in Latin America

Author

Listed:
  • Ramiro Albrieu

    (Universidad de San Andres, Buenos Aires)

  • Jose Maria Fanelli

    (Universidad de San Andres, Buenos Aires)

Abstract

The paper investigates empirically the links between the fiscal space, fiscal redistributions, and distributional outcomes for the case of Latin America. It focus on two factors; first, the role of intertemporal restrictions and debt sustainability and, second, the demographic transition’s influence on the fiscal redistribution structure. The paper identifies some stylized facts that matter in designing distribution-friendly fiscal consolidation policies. Two findings deserve highlighting. First, the way in which a given fiscal adjustment is implemented matters to income distribution. As a general rule, the downward adjustment of expenditures is regressive, although the importance of the impact varies substantially according to the expenditure item and from one economy to another. Second, the Demographic Window of Opportunity (DWO) is the key stage of the demographic transition regarding the fiscal space in Latin America. Younger countries are entering the DWO and the older ones have to prepare to abandon it and enter the aging stage. The exercises suggest that the DWO will create the fiscal space required to implement progressive policies in younger countries while the opposite will occur in the countries that will age. The simulations indicate that the demographic transition-driven effects on the items of fiscal redistributions are potentially very large and have substantial consequences for income distribution and debt sustainability.

Suggested Citation

  • Ramiro Albrieu & Jose Maria Fanelli, 2018. "Fiscal Redistribution, Sustainability, and Demography in Latin America," Commitment to Equity (CEQ) Working Paper Series 80, Tulane University, Department of Economics.
  • Handle: RePEc:tul:ceqwps:80
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    File URL: http://repec.tulane.edu/RePEc/ceq/ceq80.pdf
    File Function: First version, 2018
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    References listed on IDEAS

    as
    1. Peter S. Heller, 2005. "Understanding Fiscal Space," IMF Policy Discussion Papers 05/4, International Monetary Fund.
    2. 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.
    3. Nora Lustig & Carola Pessino, 2013. "Social spending and income redistribution in Argentina during the 2000s: The rising noncontributory pensions," Commitment to Equity (CEQ) Working Paper Series 05, Tulane University, Department of Economics, revised Aug 2013.
    4. Nora Lustig & Carola Pessino, 2013. "Social spending and income redistribution in Argentina during the 2000s: The rising noncontributory pensions," Commitment to Equity (CEQ) Working Paper Series 1305, Tulane University, Department of Economics, revised Aug 2013.
    5. Donghyun Park & Sang-Hyop Lee & Andrew Mason (ed.), 2012. "Aging, Economic Growth, and Old-Age Security in Asia," Books, Edward Elgar Publishing, number 15088, December.
    6. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Fiscal Policy; Demographics;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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