Fiscal Policy and Income Distribution: Measurement for Argentina 1995 ¨C 2010

Walter Cont () and Alberto Porto
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Walter Cont: Fundaci¨®n de Investigaciones Econ¨®micas Latinoamericanas ¨C Departamento de Econom¨ªa, Universidad Nacional de La Plata ¨C Departamento de Econom¨ªa, Universidad de Buenos Aires, ARGENTINA

Review of Economics & Finance, 2016, vol. 6, 75-92

Abstract: This paper studies the effect of consolidated ¨Cnational and provincial¨C fiscal policy on personal income distribution in Argentina, building a novel panel data for 1995-2010. We find that fiscal policy reduces income inequality, summarized with the Gini coefficient, by 0.06 in 1995- 2001 (out of an ex ante average value of 0.490), and 0.08 in 2003-2010 (out of 0.497). Expenditures (mainly social services) are the tool for redistribution because taxes are regressive. Provincial expenditures account for two-thirds of the reduction in the Gini coefficient, indicating that there is no incompatibility between decentralization and redistribution. The contribution in-kind expenditures to redistribution is more important than that of cash transfers; although the latter gain relevance in 2003-2010. The impact of social expenditures and income taxes on the Gini coefficient is similar to effects found in other Latin American countries, but significantly lower than results found for OECD and European Union countries. The case of Argentina may provide useful lessons for other federal countries, in particular, considering all the expenditures and taxes and the responsibility of the different levels of governments and their effect on income distribution.

Keywords: Government budgets; Inter-jurisdictional differentials; Redistributive effects (search for similar items in EconPapers)
JEL-codes: H73 H77 I38 (search for similar items in EconPapers)
Date: 2016
Note: This research is funded by the program PICT 2013-1864, FONCYT, Argentina, and the research project ¡°Incentivos a Docentes-Investigadores¡±, Universidad Nacional de La Plata. An online Appendix explaining the allocation of expenditures and taxes among provinces and quintiles, and reporting annual values of Tables 2 to 5, is available at www.depeco.econo.unlp.edu. ar/Anexos-Publicaciones/ContPortoREF2016-OnlineAppendix.pdf Acknowledgments: The authors thank Mar¨ªa Minatta, Ana Garriga and Lucas Longo for their excellent research assistance. We are grateful to the Editor and an anonymous referee for helpful comments. Any remaining errors are the responsibility of the authors.
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