Two decades of tax-benefit reforms in Ecuador: how much have they contributed to poverty and inequality reduction?

Jara, H. Xavier ORCID: 0000-0001-6648-2653, Montesdeoca, Lourdes, Colmenarez, María Gabriela and Moreno, Lorena (2025) Two decades of tax-benefit reforms in Ecuador: how much have they contributed to poverty and inequality reduction? World Development, 190. p. 106976. ISSN 0305-750X

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Abstract

The aim of this paper is to analyze the contribution of tax-benefit reforms to changes in income poverty and inequality in Ecuador from 2003 to 2022. For this, we use decomposition methods based on counterfactual distributions obtained using tax-benefit microsimulations which allow quantifying the relative contribution of policy reforms to changes in income poverty and inequality, compared to other contributors, including demographic characteristics and changes in the market income distribution. The focus is on changes over five subperiods, namely 2003–08, 2008–14, 2014–2019, 2019–20 and 2020–22. Our results show that tax-benefit reforms introduced between 2003 and 2020 contributed to the reduction of poverty and inequality in Ecuador, reinforcing the positive contribution of changes in market income and other population factors in all subperiods between 2003 and 2014, and mitigating the negative contribution of such factors between 2014 and 2020. Over the last period of analysis (2020–22), the post-pandemic economic recovery was broadly due to an improvement of market income with an almost nil contribution of tax-benefit reforms.

Item Type:	Article
Additional Information:	© 2025 The Author(s)
Divisions:	International Inequalities Institute
Subjects:	H Social Sciences > HB Economic Theory R Medicine > RA Public aspects of medicine > RA0421 Public health. Hygiene. Preventive Medicine H Social Sciences
JEL classification:	H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies H - Public Economics > H5 - National Government Expenditures and Related Policies > H53 - Government Expenditures and Welfare Programs I - Health, Education, and Welfare > I3 - Welfare and Poverty > I32 - Measurement and Analysis of Poverty
Date Deposited:	05 Mar 2025 11:00
Last Modified:	05 Mar 2025 11:00
URI:	http://eprints.lse.ac.uk/id/eprint/127504

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