Measuring Impoverishment: An Overlooked Dimension of Fiscal Incidence
Sean Higgins () and
Nora Lustig ()
No 1315, Working Papers from Tulane University, Department of Economics
The effect of taxes and benefits on the poor is usually measured using standard poverty and inequality indicators, stochastic dominance tests, and measures of progressivity and horizontal inequity. However, these measures can fail to capture an important aspect: that some of the poor are made poorer (or some of the non-poor made poor) by the tax-benefit system. We call this impoverishment and formally establish the relationships between impoverishment, stochastic dominance tests, horizontal inequity, and progressivity measures. The directional mobility literature provides a useful framework to measure impoverishment. We propose using a transition matrix and income loss matrix, and establish a mobility dominance criterion to compare alternate tax-benefit systems. We illustrate with data from Brazil.
Keywords: stochastic dominance; poverty; fiscal incidence; mobility (search for similar items in EconPapers)
JEL-codes: I32 H22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lam, nep-ltv and nep-pbe
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