The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico and Peru: A Synthesis of Results

Nora Lustig, George Gray-Molina, Sean Higgins (), Miguel Jaramillo, Wilson Jiménez, Veronica Paz, Claudiney Pereira, Carola Pessino, John Scott and Ernesto Yañez
Additional contact information
George Gray-Molina: UNDP, New York, USA
Wilson Jiménez: Instituto Alternativo, La Paz; Bolivia
Veronica Paz: Instituto Alternativo, La Paz; Bolivia
Ernesto Yañez: Instituto Alternativo, La Paz; Bolivia

No 264, Working Papers from ECINEQ, Society for the Study of Economic Inequality

Abstract: We apply a standard tax and benefit incidence analysis to estimate the impact on inequality and poverty of direct taxes, indirect taxes and subsidies, and social spending (cash and food transfers and in-kind transfers in education and health). The extent of inequality reduction induced by direct taxes and transfers is rather small (2 percentage points on average) especially when compared with that found in Western Europe (15 percentage points on average). What prevents Argentina, Bolivia and Brazil from achieving similar reductions in inequality is not the lack of revenues but the fact that they spend less on cash transfers –especially transfers that are progressive in absolute terms--as a share of GDP. Indirect taxes result in that net contributors to the fiscal system start at the fourth, third and even second decile on average, depending on the country. When in-kind transfers in education and health are added, however, the bottom six deciles are net recipients. The impact of transfers on inequality and poverty reduction could be higher if spending on direct cash transfers that are progressive in absolute terms is increased, leakages to the nonpoor are reduced and coverage of the extreme poor by direct transfer programs is expanded.

Keywords: fiscal incidence; inequality; poverty; taxes; social spending; Latin America. (search for similar items in EconPapers)
JEL-codes: D31 D63 H11 H22 H5 I14 I24 I3 O15 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2012-09
New Economics Papers: this item is included in nep-lam, nep-ltv, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (56)

Downloads: (external link)
http://www.ecineq.org/milano/WP/ECINEQ2012-264.pdf (application/pdf)

Related works:
Working Paper: The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico, and Peru: A Synthesis of Results (2012)
Working Paper: The impact of taxes and social spending on inequality and poverty in Argentina, Bolivia, Brazil, Mexico and Peru: a synthesis of results (2012)
Working Paper: The impact of taxes and social spending on inequality and poverty in Argentina, Bolivia, Brazil, Mexico and Peru: a synthesis of results (2012)
Working Paper: The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico and Peru: A Synthesis of Results (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inq:inqwps:ecineq2012-264

Access Statistics for this paper

More papers in Working Papers from ECINEQ, Society for the Study of Economic Inequality Contact information at EDIRC.
Bibliographic data for series maintained by Maria Ana Lugo ( this e-mail address is bad, please contact ).