The impact of taxes and social spending on inequality and poverty in Argentina, Bolivia, Brazil, Mexico, Peru and Uruguay: an overview

Available from: 
October 2013
Paper author(s): 
Nora Lustig (Tulane University)
Carola Pessino (Universidad del CEMA)
John Scott (CIDE)
Topic: 
Poverty - Inequality - Aid Effectiveness
Fiscal Policy - Public and Welfare Economics
Year: 
2013


How much redistribution and poverty reduction is being accomplished in Latin America through social spending and taxes? Standard fiscal incidence analyses applied to Argentina, Bolivia, Brazil, Mexico, Peru, and Uruguay yield the following results. Taxes and transfers reduce inequality and poverty by nontrivial amounts in Argentina, Brazil, and Uruguay, less so in Mexico and relatively little in Bolivia and Peru. While direct taxes are progressive, the redistributive impact is small because direct taxes as a share of GDP are low. Cash transfers are quite progressive in absolute terms except in Bolivia where programs are not targeted to the poor. In Bolivia and Brazil, indirect taxes almost completely offset the poverty-reducing impact of cash transfers. In-kind transfers in education and health reduce inequality in all countries by considerably more than cash transfers.

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Research section: 
Lacea 2013 annual meeting
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