Fiscal policy, income redistribution, and poverty reduction in Latin America

Nora Lustig, Valentina Martinez Pabon and Carola Pessino

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper uses standard fiscal incidence analysis to study how much income redistribution and poverty reduction are accomplished through the fiscal system in eighteen Latin American and Caribbean (LAC) countries. We show there is considerable heterogeneity in the income inequality and poverty-reducing power of LAC fiscal systems. While all LAC fiscal systems reduce income inequality, fiscal systems in nine LAC countries are poverty-increasing, and this startling characteristic has not improved over time. When analyzing specific fiscal elements, we find that direct taxes, direct transfers, and in-kind transfers are all equalizing, and spending on education and health is often pro-poor. Moreover, contrary to expectations, indirect taxes and subsidies are more frequently equalizing than unequalizing.

Keywords: fiscal policy; inequality; poverty; Latin America (search for similar items in EconPapers)
JEL-codes: D31 D60 E62 H22 I32 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2023-11-01
New Economics Papers: this item is included in nep-lam and nep-ltv
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http://eprints.lse.ac.uk/120683/ Open access version. (application/pdf)

Related works:
Working Paper: Fiscal Policy, Income Redistribution, and Poverty Reduction in Latin America (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:120683

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