IDEAS home Printed from https://ideas.repec.org/p/tul/ceqwps/85.html
   My bibliography  Save this paper

Leaving No One Behind: Can Tax-Funded Transfer Programs Provide Income Floors in Sub-Saharan Africa?

Author

Listed:
  • Nora Lustig

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

  • Jon Jellema
  • Valentina Martinez Pabon

Abstract

We use results from nine different country-based Commitment to Equity (CEQ) Assessments in sub-Saharan Africa to demonstrate the welfare impact in low- and middle-income countries of policy scenarios which (a) redirect current subsidy expenditures to direct cash transfer programs; (b) establish income floors to be funded from both current subsidy expenditure as well as from additional revenues generated through current direct and indirect tax instruments; and (c) target direct cash transfer spending to poor populations or to general populations (a "universal" transfer). Results indicate that at baseline the existing combination of taxes and transfers increases post-fiscal poverty in all countries but upper middle-income Namibia and South Africa. This result - which we call fiscal impoverishment - is most often due to the fact that the poor pay consumption taxes but receive very little in cash transfers and an exceedingly small share of total subsidies. Reallocating expenditures on general price subsidies to targeted transfers would yield better poverty outcomes in most countries, but a portion of the not-so-poor poor would then receive no transfers at all. Results also show that setting income floors equivalent to international poverty lines and funding the necessary transfers with direct taxes from individuals is often not feasible for two reasons: there is extreme reranking of individuals (from preto post-fiscal income) and negative post-fiscal incomes for tax-paying individuals and the tax burden on the nonpoor would be significantly higher. Scenarios establishing income floors are more likely to be feasible when the required additional funding is financed by a proportional increase in indirect taxes

Suggested Citation

  • Nora Lustig & Jon Jellema & Valentina Martinez Pabon, 2019. "Leaving No One Behind: Can Tax-Funded Transfer Programs Provide Income Floors in Sub-Saharan Africa?," Commitment to Equity (CEQ) Working Paper Series 85, Tulane University, Department of Economics.
  • Handle: RePEc:tul:ceqwps:85
    as

    Download full text from publisher

    File URL: http://repec.tulane.edu/RePEc/ceq/ceq85.pdf
    File Function: First version, 2019
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Brown, Caitlin & Ravallion, Martin & van de Walle, Dominique, 2018. "A poor means test? Econometric targeting in Africa," Journal of Development Economics, Elsevier, vol. 134(C), pages 109-124.
    2. Mr. Kangni R Kpodar & Moataz El-Said & Mr. David Coady & Mr. Paulo A Medas & David Locke Newhouse & Mr. Robert Gillingham, 2006. "The Magnitude and Distribution of Fuel Subsidies: Evidence from Bolivia, Ghana, Jordan, Mali, and Sri Lanka," IMF Working Papers 2006/247, International Monetary Fund.
    3. Moore, Mick & Prichard, Wilson & Fjeldstad, Odd-Helge, 2018. "Taxing Africa: Coercion, Reform and Development," Working Papers 13997, Institute of Development Studies, International Centre for Tax and Development.
    4. Dean Jolliffe & Espen Beer Prydz, 2016. "Estimating international poverty lines from comparable national thresholds," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 14(2), pages 185-198, June.
    5. De La Fuente,Alejandro & Rosales,Manuel & Jellema,Jon Robbert, 2017. "The impact of fiscal policy on inequality and poverty in Zambia," Policy Research Working Paper Series 8246, The World Bank.
    6. Moore, Mick & Prichard, Wilson & Fjeldstad, Odd-Helge, 2018. "Taxing Africa," University of Chicago Press Economics Books, University of Chicago Press, number 9781783604548, Febrero.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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," Working Papers 582, ECINEQ, Society for the Study of Economic Inequality.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nora Lustig & Jon Jellema & Valentina Martinez Pabon, 2021. "Are Budget Neutral Income Floors Fiscally Viable in Sub-saharan Africa?," Commitment to Equity (CEQ) Working Paper Series 86, Tulane University, Department of Economics.
    2. Nora Lustig & Jon Jellema & Valentina Martinez Pabon, 2021. "Are Budget Neutral Income Floors Fiscally Viable in Sub-Saharan Africa?," Working Papers 2106, Tulane University, Department of Economics.
    3. Stephen Hall & Janine Illian & Innocent Makuta & Kyle McNabb & Stuart Murray & Bernadette AM O’Hare & Andre Python & Syed Haider Ali Zaidi & Naor Bar-Zeev, 2021. "Government Revenue and Child and Maternal Mortality," Open Economies Review, Springer, vol. 32(1), pages 213-229, February.
    4. Abel Gwaindepi, 2021. "Domestic revenue mobilisation in developing countries: An exploratory analysis of sub‐Saharan Africa and Latin America," Journal of International Development, John Wiley & Sons, Ltd., vol. 33(2), pages 396-421, March.
    5. Franklin Obeng‐Odoom, 2021. "Oil Cities in Africa: Beyond Just Transition," American Journal of Economics and Sociology, Wiley Blackwell, vol. 80(2), pages 777-821, March.
    6. 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.
    7. Yawovi Mawussé Isaac Amedanou, 2021. "Politics, Institutions and Tax Revenue Mobilization in West African Economic and Monetary Union (WAEMU) Countries," Working Papers hal-03255316, HAL.
    8. von Haldenwang, Christian, 2020. "Digitalising the fiscal contract: An interdisciplinary framework for empirical inquiry," Discussion Papers 20/2020, German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE).
    9. Paolo Verme & Abdelkrim Araar, 2017. "The Quest for Subsidies Reforms in the Middle East and North Africa Region," World Bank Publications, The World Bank, number 25783, July.
    10. Gabriella Y. Carolini, 2021. "Aid’s urban footprint and its implications for local inequality and governance," Environment and Planning A, , vol. 53(2), pages 389-409, March.
    11. Benjamin Jones & Michael Keen & Jon Strand, 2013. "Fiscal implications of climate change," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(1), pages 29-70, February.
    12. Sylvester Ngome Chisika & Juneyoung Park & Chunho Yeom, 2019. "The Impact of Legislation on Sustainability of Farm Forests in Kenya: The Case of Lugari Sub-County in Kakamega County, Kenya," Sustainability, MDPI, Open Access Journal, vol. 12(1), pages 1-15, December.
    13. Falconnier, Gatien N. & Descheemaeker, Katrien & Traore, Bouba & Bayoko, Arouna & Giller, Ken E., 2018. "Agricultural intensification and policy interventions: Exploring plausible futures for smallholder farmers in Southern Mali," Land Use Policy, Elsevier, vol. 70(C), pages 623-634.
    14. Dang, Hai-Anh H. & Verme, Paolo, 2019. "Estimating Poverty for Refugee Populations: Can Cross-Survey Imputation Methods Substitute for Data Scarcity?," GLO Discussion Paper Series 429, Global Labor Organization (GLO).
    15. Haas, Nicholas & Hassan, Mazen & Mansour, Sarah & Morton, Rebecca B., 2021. "Polarizing information and support for reform," Journal of Economic Behavior & Organization, Elsevier, vol. 185(C), pages 883-901.
    16. Marcelo Piancastelli & A.P.Thirlwall, 2019. "The Determinants of Tax Revenue and Tax Effort in Developed and Developing Countries: Theory and New Evidence 1995-2015," Studies in Economics 1903, School of Economics, University of Kent.
    17. Brun, Martín & Colacce, Maira, 2019. "Medición de la pobreza monetaria en el Uruguay: conceptos, metodologías, evolución y alternativas," Estudios y Perspectivas – Oficina de la CEPAL en Montevideo 37, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    18. Christophe Muller & Nouréini Sayouti, 2021. "How does information on minimum and maximum food prices affect measured monetary poverty? Evidence from Niger," AMSE Working Papers 2102, Aix-Marseille School of Economics, France.
    19. Margitic, Juan & Ravallion, Martin, 2019. "Lifting the floor? Economic development, social protection and the developing World's poorest," Journal of Development Economics, Elsevier, vol. 139(C), pages 97-108.
    20. Kakwani, Nanak & Li, Shi & Wang, Xiaobing & Zhu, Mengbing, 2019. "Evaluating the effectiveness of the rural minimum living standard guarantee (Dibao) program in China," China Economic Review, Elsevier, vol. 53(C), pages 1-14.

    More about this item

    Keywords

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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tul:ceqwps:85. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/detulus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Nora Lustig (email available below). General contact details of provider: https://edirc.repec.org/data/detulus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.