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

Author

Listed:
  • Nora Lustig

    (Department of Economics, Tulane University)

  • Florencia Amabile

    (Economics Department, Universidad de la Republica, Uruguay)

  • Marisa Bucheli

    (Economics Department, Universidad de la Republica, Uruguay)

  • George Gray Molina

    (Chief Economist for UNDP-Latin America and the Caribbean, New York, New York)

  • Sean Higgins

    (Department of Economics, Tulane University)

  • Miguel Jaramillo

    (GRADE (Grupo de Análisis para el Desarrollo), Peru)

  • Wilson Jimenez Pozo
  • Veronica Paz Arauco
  • Claudiney Pereira

    (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)

  • Maximo Rossi

    (Economics Department, Universidad de la Republica, Uruguay)

  • 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)

  • Ernesto Yanez Aguilar

Abstract

How much redistribution and poverty reduction is being accomplished in Latin America through social spending, subsidies, and taxes? Standard fiscal incidence analyses applied to Argentina, Bolivia, Brazil, Mexico, Peru, and Uruguay using a comparable methodology yields the following results. Direct taxes and cash transfers reduce inequality and poverty by nontrivial amounts in Argentina, Brazil, and Uruguay but less so in Bolivia, Mexico, and Peru. While direct taxes are progressive, the redistributive impact is small because direct taxes as a share of GDP are generally 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 more than offset the poverty-reducing impact of cash transfers. When one includes the in-kind transfers in education and health, valued at government costs, they reduce inequality in all countries by considerably more than cash transfers, reflecting their relative size.

Suggested Citation

  • Nora Lustig & Florencia Amabile & Marisa Bucheli & George Gray Molina & Sean Higgins & Miguel Jaramillo & Wilson Jimenez Pozo & Veronica Paz Arauco & Claudiney Pereira & Carola Pessino & Maximo Rossi , 2013. "The Impact of Taxes and Social Spending on Inequality in Argentina, Bolivia, Brazil, Mexico, Peru and Uruguay: An Overview," Working Papers 1316, Tulane University, Department of Economics.
    • Handle: RePEc:tul:wpaper:1316
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    File URL: http://repec.tulane.edu/RePEc/pdf/tul1316.pdf
    File Function: First Version, April 2013
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    Citations

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    Cited by:

    1. John Scott, 2013. "Redistributive Impact and Efficiency of Mexico's Fiscal System," Commitment to Equity (CEQ) Working Paper Series 08, Tulane University, Department of Economics, revised Jul 2013.
    2. Branko Milanovic & Sean Higgins & Nora Lustig & Whitney Ruble & Timothy M. Smeeding, 2016. "Comparing the Incidence of Taxes and Social Spending in Brazil and the United States," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62, pages 22-46, August.
    3. 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.
    4. Nora Lustig & George Gray Molina & Sean Higgins & Miguel Jaramillo & Wilson Jimenez & Veronica Paz & Claudiney Pereira & Carola Pessino & John Scott & Ernesto Yanez, 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 1216, Tulane University, Department of Economics.
    5. Nora Lustig, 2013. "Commitment to Equity: Diagnostic Questionnaire," Commitment to Equity (CEQ) Working Paper Series 02, Tulane University, Department of Economics.

    More about this item

    Keywords

    fiscal incidence; inequality; poverty; taxes; social spending; Latin America;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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