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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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