Social spending, taxes and income redistribution in Ecuador

Produced by: 
Tulane University
Available from: 
February 2015
Paper author(s): 
Freddy Paúl Llerena Pinto
M. Cristhina Llerena Pinto
M. Andrea Llerena Pinto
Roberto Saá
Topic: 
Poverty - Inequality - Aid Effectiveness
Fiscal Policy - Public and Welfare Economics
Year: 
2016

An analysis of the redistributive effect of fiscal policy on poverty reduction and income distribution in Ecuador using household survey data is described. Due to the detail and depth of the database, it is possible to single out the effects of direct transfers and taxes, indirect taxes and subsidies, and the use of public education and health services. Standard incidence analysis shows that direct taxes are progressive. Nonetheless, they have a negligible effect on both income distribution and poverty. Indirect taxes are progressive as well, due to several exemptions from the value added tax. Social spending on direct transfers, education, and health is progressive in absolute terms, except for secondary education, wherein it is neutral. Ecuador ranks first in inequality reduction effectiveness and second in poverty reduction effectiveness when compared to six other Latin American countries. However, it ranks only fourth in overall inequality and poverty reduction.

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