Inequality and Fiscal Redistribution in Middle Income Countries: Brazil, Chile, Colombia, Indonesia, Mexico, Peru and South Africa - Working Paper 410

Nora Lustig

No 410, Working Papers from Center for Global Development

Abstract: This paper examines the redistributive impact of fiscal policy for Brazil, Chile, Colombia, Indonesia, Mexico, Peru and South Africa using comparable fiscal incidence analysis with data from around 2010. The largest redistributive effect is in South Africa and the smallest in Indonesia. Success in fiscal redistribution is driven primarily by redistributive effort (share of social spending to GDP in each country) and the extent to which transfers/subsidies are targeted to the poor and direct taxes targeted to the rich. While fiscal policy always reduces inequality, this is not the case with poverty. Fiscal policy increases poverty in Brazil and Colombia (over and above market income poverty) due to high consumption taxes on basic goods. The marginal contribution of direct taxes, direct transfers and inkind transfers is always equalizing. The marginal effect of net indirect taxes is unequalizing in Brazil, Colombia, Indonesia and South Africa. Total spending on education is pro-poor except for Indonesia, where it is neutral in absolute terms. Health spending is pro-poor in Brazil, Chile, Colombia and South Africa, roughly neutral in absolute terms in Mexico, and not pro-poor in Indonesia and Peru.

Keywords: fiscal incidence; social spending; inequality; developing countries (search for similar items in EconPapers)
JEL-codes: D31 H22 I3 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2015-08
New Economics Papers: this item is included in nep-lam, nep-ltv, nep-pub and nep-sea
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:cgd:wpaper:410

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