The effect of fiscal drag on income distribution and work incentives: A microsimulation analysis on selected African countries

Adnan Shahir and Francesco Figari

No wp-2021-167, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: Although the effect of fiscal drag is well studied in the industrialized world, empirical evidence from developing economies remains limited. Against this backdrop, this study aims to explore the effect of fiscal drag on income distribution and work incentives. To this end, the study employs SOUTHMOD, the tax-benefit microsimulation model, for six African countries: Ethiopia, South Africa, Tanzania, Uganda, Mozambique, and Zambia. Three important conclusions are drawn from our empirical investigation.

Keywords: Inflation; Income tax; Fiscal drag; Fiscal redistribution; Africa; Microsimulation; Income distribution (search for similar items in EconPapers)
Date: 2021
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