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The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico, Peru and Uruguay: An Overview

  • Nora Lustig

    ()

    (Department of Economics, Tulane University)

  • Carola Pessino

    ()

    (School of Government and Executive Director, Centro de Investigaciones y Evaluación en Economía Social para el Alivio de la Pobreza, Universidad Torcuato Di Tella, Buenos Aires, Argentina)

  • John Scott

    ()

    (CIDE (Centro de Investigación y Docencia Económicas), Mexico and,Consejero Académico, CONEVAL (Consejo Nacional de Evaluación de la Política de Desarrollo Social), Mexico)

How much redistribution and poverty reduction is being accomplished in Latin America through social spending and taxes? Standard fiscal incidence analyses applied to Argentina, Bolivia, Brazil, Mexico, Peru, and Uruguay yield the following results. Direct taxes and cash transfers reduce inequality and poverty by nontrivial amounts in Argentina, Brazil, and Uruguay, less so in Mexico and relatively little in Bolivia and Peru. While direct taxes are progressive, the redistributive impact is small because direct taxes as a share of GDP are low. Cash transfers are quite progressive in absolute terms except in Bolivia where programs are not targeted to the poor. In Bolivia and Brazil, indirect taxes almost completely offset the poverty-reducing impact of cash transfers. In-kind transfers in education and health reduce inequality in all countries by considerably more than cash transfers.

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File URL: http://econ.tulane.edu/RePEc/pdf/tul1313.pdf
File Function: First Version, April 2013
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Paper provided by Tulane University, Department of Economics in its series Working Papers with number 1313.

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Length: 31 pages
Date of creation: Apr 2013
Date of revision:
Handle: RePEc:tul:wpaper:1313
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  1. Nora Lustig & George Gray-Molina & Sean Higgins & Miguel Jaramillo & Wilson Jiménez & Veronica Paz & Claudiney Pereira & Carola Pessino & John Scott & Ernesto Yañez, 2012. "The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico and Peru: A Synthesis of Results," Working Papers 264, ECINEQ, Society for the Study of Economic Inequality.
  2. Marisa Bucheli & Nora Lustig & Maximo Rossi & Florencia Amábile, 2012. "Social Spending, Taxes and Income Redistribution in Uruguay," Working Papers 263, ECINEQ, Society for the Study of Economic Inequality.
  3. 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.
  4. Jorge Martinez-Vazquez, 2001. "The Impact of Budgets on the Poor: Tax and Benefit," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0110, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  5. Nora Lustig & Carola Pessino, 2012. "Social Spending and Income Redistribution in Argentina During the 2000s: the Rising Role of Noncontributory Pensions," Working Papers 1221, Tulane University, Department of Economics.
  6. Kakwani, Nanok C, 1977. "Measurement of Tax Progressivity: An International Comparison," Economic Journal, Royal Economic Society, vol. 87(345), pages 71-80, March.
  7. 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.
  8. Nora Lustig & Luis F. Lopez-Calva & Eduardo Ortiz-Juarez, 2012. "Declining Inequality in Latin America in the 2000s: The Cases of Argentina, Brazil, and Mexico," Working Papers 1218, Tulane University, Department of Economics.
  9. Nora Lustig & Sean Higgins, 2012. "Commitment to Equity Assessment (CEQ): Estimating the Incidence of Social Spending, Subsidies and Taxes Handbook," Working Papers 1219, Tulane University, Department of Economics.
  10. Francisco H.G. Ferreira & Julian Messina & Jamele Rigolini & Luis-Felipe López-Calva & Maria Ana Lugo & Renos Vakis, 2013. "Economic Mobility and the Rise of the Latin American Middle Class," World Bank Publications, The World Bank, number 11858.
  11. Herwig Immervoll & Horacio Levy & José Ricardo Nogueira & Cathal O´Donoghue & Rozane Bezerra de Siqueira, 2005. "The Impact of Brazil´s Tax-Benefit System on Inequality and Poverty," Ibero America Institute for Econ. Research (IAI) Discussion Papers 117, Ibero-America Institute for Economic Research.
  12. Wagstaff, Adam, 2010. "Benefit incidence analysis : are government health expenditures more pro-rich than we think ?," Policy Research Working Paper Series 5234, The World Bank.
  13. Breceda, Karla & Rigolini, Jamele & Saavedra, Jaime, 2008. "Latin America and the social contract : patterns of social spending and taxation," Policy Research Working Paper Series 4604, The World Bank.
  14. Sean Higgins & Nora Lustig & Julio Ramirez & Billy Swanson, 2013. "Social Spending, Taxes and Income Redistribution in Paraguay," Working Papers 1311, Tulane University, Department of Economics.
  15. Blanca Moreno-Dodson & Quentin Wodon, 2008. "Public Finance for Poverty Reduction : Concepts and Case Studies from Africa and Latin America," World Bank Publications, The World Bank, number 6881.
  16. Owen O'Donnell & Eddy van Doorslaer & Adam Wagstaff & Magnus Lindelow, 2008. "Analyzing Health Equity Using Household Survey Data : A Guide to Techniques and Their Implementation," World Bank Publications, The World Bank, number 6896.
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