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


  • Ali Enami

    () (Department of Economics, Tulane University)

  • Nora Lustig

    () (Department of Economics, Tulane University)

  • Alireza Taqdiri

    () (Department of Economics, University of Akron)


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.

Suggested Citation

  • Ali Enami & Nora Lustig & Alireza Taqdiri, 2016. "Fiscal Policy, Inequality and Poverty in Iran: Assessing the Impact and Effectiveness of Taxes and Transfers," Working Papers 1605, Tulane University, Department of Economics, revised Sep 2017.
  • Handle: RePEc:tul:wpaper:1605

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    Cited by:

    1. Ali Enami & Nora Lustig, 2018. "Inflation and the Erosion of the Poverty Reduction Impact of Iran's Universal Cash Transfer," Commitment to Equity (CEQ) Working Paper Series 68, Tulane University, Department of Economics.
    2. repec:eee:socmed:v:195:y:2017:i:c:p:1-11 is not listed on IDEAS
    3. Nora Lustig, 2017. "Fiscal Policy, Income Redistribution and Poverty Reduction in Low and Middle Income Countries," Commitment to Equity (CEQ) Working Paper Series 54, Tulane University, Department of Economics.
    4. Ali Enami, 2016. "An Application of the CEQ Effectiveness Indicators: The Case of Iran," Commitment to Equity (CEQ) Working Paper Series 58, Tulane University, Department of Economics.
    5. repec:idb:idbbks:9152 is not listed on IDEAS

    More about this item


    : Incidence analysis; marginal contribution; effectiveness; energy subsidy reform; Iran.;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • 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

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