A note of caution to policymakers on this edition of the CGD Podcast: make sure the policies you enact to reduce inequality do not end up raising poverty. That’s what my guest Nora Lustig found in her studies of developing countries – mainly in Latin America.
“In a bunch of countries, the poor are net payers in cash,” she tells me. “They may get back in-kind, like education and health, but if you’re concerned about the ability of the poor to feed themselves, to house themselves, then certainly you don’t want the state to leave them with less money than when they started.”
As a Professor of Latin American economics at Tulane University, Lustig runs the Commitment to Equity Institute, which seeks to analyze the impact of taxation and social spending on inequality and poverty. She’s also a member of the World Bank’s prestigious Global Poverty Commission and a CGD non-resident fellow.
She tells me her studies showed that “in Brazil, poverty doesn’t increase, but then when you look within the poor, some gain, some lose. We found that… 40% were made poorer by taxes and transfers. Why? Because in Brazil, rice and beans [carry] close to 20% in taxes. So you do the math.”
Watch the podcast below.
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