Fiscal policy, inequality and the ethnic divide in Guatemala

Produced by: 
Society for the Study of Economic Inequality (ECINEQ)
Available from: 
October 2014
Paper author(s): 
Maynor Cabrera (Fedes)
Nora Lustig (Tulane University, USA)
Hilcías E. Morán (Bank of Guatemala, Guatemala)
Topic: 
Microeconomics - Competition - Productivity
Poverty - Inequality - Aid Effectiveness
Fiscal Policy - Public and Welfare Economics
Year: 
2015

Guatemala is one of the most unequal countries in Latin America and has the highest incidence of poverty. The indigenous population is more than twice as likely of being poor than the nonindigenous group. Fiscal incidence analysis based on the 2009-2010 National Survey of Family Income and Expenditures shows that taxes and transfers do almost nothing to reduce inequality and poverty overall or along ethnic and rural-urban lines. Persistently low tax revenues are the main limiting factor. Tax revenues are not only low but also regressive. Consumption taxes are regressive enough to oset the benets of cash transfers: poverty after taxes and cash transfers is higher than market income poverty.

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