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Fiscal Policy, Inequality and Poverty in Iran: Assessing the Impact and Effectiveness of Taxes and Transfers

Listed author(s):
  • Ali Enami

    ()

    (Department of Economics, Tulane University)

  • Nora Lustig

    ()

    (Department of Economics, Tulane University)

  • Alireza Taqdiri

    ()

    (Department of Economics, University of Akron)

Registered author(s):

    Using the Iranian Household Expenditure and Income Survey for 2011/12, we estimate the impact and effectiveness of various components of Iran's fiscal system on reducing inequality and poverty. We utilize the marginal contribution analysis to determine the impact of each component, and we introduce newly developed indicators of effectiveness to calculate how well various taxes and transfers are operating to reduce inequality and poverty. We find that the fiscal system reduces the poverty-head-count-ratio by 10.5 percentage points and inequality by 0.0854 Gini points. Transfers are generally more effective in reducing inequality than taxes while taxes are especially effective in raising revenue without causing poverty to rise. Although transfers are not targeted toward the poor, they reduce poverty significantly. The main driver is the Targeted Subsidy Program (TSP), and we show through simulations that the poverty reducing impact of TSP could be enhanced if resources were more targeted to the bottom deciles.

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    File URL: http://econ.tulane.edu/RePEc/pdf/tul1605r.pdf
    File Function: Revised Version, September 2017
    Download Restriction: no

    Paper provided by Tulane University, Department of Economics in its series Working Papers with number 1605.

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    Date of creation: Jul 2016
    Date of revision: Sep 2017
    Handle: RePEc:tul:wpaper:1605
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