Ideas to Action:

Independent research for global prosperity



January 3, 2017

The Impact of Taxes and Social Spending on Inequality and Poverty in El Salvador - Working Paper 447

We conducted a fiscal impact study to estimate the effect of taxes, social spending, and subsidies on inequality and poverty in El Salvador, using the methodology of the Commitment to Equity project. Taxes are progressive, but given their volume, their impact is limited. Direct transfers are concentrated on poor households, but their budget is small so their effect is limited; a significant portion of the subsidies goes to households in the upper income deciles, so although their budget is greater, their impact is low. The component that has the greatest effect on inequality is spending on education and health. Therefore, the impact of fiscal policy is limited and low when compared with other countries with a similar level of per capita income. There is room for improvement using current resources.

Margarita Beneke , Nora Lustig and José Andrés Oliva
January 3, 2017

Analytic Foundations: Measuring the Redistributive Impact of Taxes and Transfers - Working Paper 446

This paper provides a theoretical foundation for analyzing the redistributive effect of taxes and transfers for the case in which the ranking of individuals by pre-fiscal income remains unchanged. We show that in a world with more than a single fiscal instrument, the simple rule that progressive taxes or transfers are always equalizing not necessarily holds, and offer alternative rules that survive a theoretical scrutiny. In particular, we show that the sign of the marginal contribution unambiguously predicts whether a tax or a transfer is equalizing or not.

Ali Enami , Nora Lustig and Rodrigo Aranda
November 10, 2016

The Impact of Taxes, Transfers, and Subsidies on Inequality and Poverty in Uganda - Working Paper 443

This paper uses the 2012/13 Uganda National Household Survey to analyze the redistributive effectiveness and impact on poverty and inequality of Uganda’s revenue collection instruments and social spending programs. Fiscal policy—including many of its constituent tax and spending elements—is inequality-reducing in Uganda, but the reduction of inequality due to fiscal policy in Uganda is lower than other countries with similar levels of initial inequality, a result tied to low levels of spending in Uganda generally. The impact of fiscal policy on poverty is negligible, while the combination of very sparse coverage of direct transfer programs and nearly complete coverage of indirect tax instruments means that many poor households are net payers into, rather than net recipients from, the fiscal system. As Uganda looks ahead to increased revenues from taxation and concurrent investments in productive infrastructure, it should take care to protect the poorest households from further impoverishment from the fiscal system.

Jon Jellema , Nora Lustig , Astrid Haas and Sebastian Wolf
November 8, 2016

Fiscal Policy, Inequality and the Poor in the Developing World - Working Paper 441

Using comparable fiscal incidence analysis, this paper examines the impact of fiscal policy on inequality and poverty in twenty-five countries for around 2010. 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. While spending on pre-school and primary school is pro-poor (i.e., the per capita transfer declines with income) in almost all countries, pro-poor secondary school spending is less prevalent, and tertiary education spending tends to be progressive only in relative terms (i.e., equalizing but not pro-poor). Health spending is always equalizing except for Jordan.

August 21, 2015

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

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. While fiscal policy always reduces inequality, this is not the case with poverty.

Can a Poverty-Reducing and Progressive Tax and Transfer System Hurt the Poor? - Working Paper 405
May 21, 2015

Can a Poverty-Reducing and Progressive Tax and Transfer System Hurt the Poor? - Working Paper 405

Whether the poor are helped or hurt by taxes and transfers is generally determined by comparing income distributions before and after fiscal policy using stochastic dominance tests and measures of progressivity and horizontal inequity. We formally show that these tools can fail to capture an important aspect: that a substantial proportion of the poor are made poorer (or non-poor made poor) by the tax and transfer system.

Sean Higgins and Nora Lustig
August 8, 2013

The Strugglers: The New Poor in Latin America? - Working Paper 337

In this paper we identify a group of people in Latin America and other developing countries that are not poor but not middle class either. We define them as the vulnerable “strugglers”, people living in households with daily income per capita between $4 and $10 (at constant 2005 PPP dollar). They are well above the international poverty line, but still vulnerable to falling back into poverty and hence not part of the secure middle class. In a first step, we use long-term growth projections to show that in Latin America about 200 million people will likely be in the struggler group in 2030, accounting for about a third of the total population.

August 11, 2011

Scholars Who Became Practitioners - Working Paper 263

Mexico’s Progresa/Oportunidades conditional cash transfers program (CCT) is constantly used as a model of a successful antipoverty program. This paper argues that the transformation of well-trained scholars into influential practitioners played a fundamental role in promoting a new conceptual approach to poverty reduction.