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

Lustig, Nora, Martinez Pabon, Valentina and Pessino, Carola (2023) Fiscal policy, income redistribution, and poverty reduction in Latin America. III Working Papers (115). International Inequalities Institute, London School of Economics and Political Science, London, UK.

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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.

Item Type: Monograph (Working Paper)
Official URL:
Additional Information: © 2023 The Author(s)
Divisions: International Inequalities Institute
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HJ Public Finance
H Social Sciences > HC Economic History and Conditions
JEL classification: D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions
D - Microeconomics > D6 - Welfare Economics > D60 - General
E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H22 - Incidence
I - Health, Education, and Welfare > I3 - Welfare and Poverty > I32 - Measurement and Analysis of Poverty
Date Deposited: 09 Nov 2023 10:24
Last Modified: 16 May 2024 12:31

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