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On the middle 70%. The impact of fiscal policy on the emerging middle class in Latin America using Commitment to Equity

Author

Listed:
  • Christian Daude

    (Development Bank of Latin America - CAF)

  • Nora Lustig

    (Department of Economics, Tulane University)

  • Angel Melguizo

    (OECD Development Centre)

  • Jose Ramon Perea

    (World Bank)

Abstract

This paper analyzes the effects of indirect and direct taxes, as well as monetary and in-kind transfers on the income distribution in nine Latin American countries applying the CEQ methodology and using household and expenditure microdata around 2010. In particular, we focus on the effect of fiscal policies on two groups of the emerging middle class: the vulnerable and the middle class. We find that while the vulnerable tend to be net receivers in fiscal terms, especially when including in-kind transfers, the middle class seems to be mainly a net payer. This might be aggravated by the perception of a relatively low quality of in-kind transfers, notably in education and health-care services. We provide some evidence based on subjective surveys pointing in this direction.

Suggested Citation

  • Christian Daude & Nora Lustig & Angel Melguizo & Jose Ramon Perea, 2017. "On the middle 70%. The impact of fiscal policy on the emerging middle class in Latin America using Commitment to Equity," Working Papers 1716, Tulane University, Department of Economics.
  • Handle: RePEc:tul:wpaper:1716
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    References listed on IDEAS

    as
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    5. 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.
    6. Roberto Angulo & Alejandro Gaviria Uribe & Liliana Morales, 2014. "La década ganada: evolución de la clase media, la pobreza y la vulnerabilidad en Colombia 2002-2011," Coyuntura Económica, Fedesarrollo, June.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Middle class; tax-benefit analysis; fiscal incidence; fiscal mobility;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General

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