Equity and Fiscal Policy: The Income Distribution Effects of Taxation and Social Spending in Central America

Rodrigo Cubero and Ivanna Hollar

No 2010/112, IMF Working Papers from International Monetary Fund

Abstract: How does fiscal policy fare in improving the underlying income distribution in Central America? We integrate the data from a number of existing tax and public expenditure studies for the countries in the region and find that the distributional effect of taxation is regressive but small. In contrast, the redistributive impact of social spending is large and progressive, leading to a progressive net redistributive effect in all countries of the region. We also show that raising tax revenues and devoting the proceeds to social spending would unambiguously improve the income of the poorest households.

Keywords: WP; income; spending; Gini coefficient; social spending; tax revenue (search for similar items in EconPapers)
Pages: 42
Date: 2010-05-01
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Citations: View citations in EconPapers (34)

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