Equity and Fiscal Policy: The Income Distribution Effects of Taxation and Social Spending in Central America

Abstract

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. How does fiscal policy fare in improving the underlying income distribution in Central America? We integrate the data from a number of existing tax and public expenditure studies for the countries in the region and find that the distributional effect of taxation is regressive but small. In contrast, the redistributive impact of social spending is large and progressive, leading to a progressive net redistributive effect in all countries of the region. We also show that raising tax revenues and devoting the proceeds to social spending would unambiguously improve the income of the poorest households.

Le rôle de la fiscalité dans la réduction des inégalités : doit-on se soucier de la structure fiscale servant à prélever les recettes?

“…Les études portant sur les pays développés et certains pays en développement conviennent que les transferts sont plus efficaces que la fiscalité pour réduire les iné-galités, et ce, même en tenant compte de la progressivité de la structure fiscale, des déductions et des crédits d'impôt (Cubero et Hollar, 2010;Goñi, López et Servén, 2011;Joumard, Pisu et Bloch, 2012;Martinez-Vazquez, Moreno-Dodson et Vulovic, 2012).…”

Analisis Ketimpangan Distribusi Pendapatan 33 Provinsi Di Indonesia

“…Penelitian mengenai pengaruh pengeluaran pemerintah terhadap ketimpangan distribusi pendapatan dilakukan oleh Cubero (2010). Mereka meneliti pengaruh distribusi pendapatan melalui pajak dan pengeluaran sosial di negara-negara kawasan Amerika Tengah.…”

Fiscal Policy and Natural Resource Entitlements

“…I discuss behavioural responses below. Table 3 reports the results along with estimates for a range of Latin American and European countries from an international study by the IMF (Cubero and Hollar, 2010). Such international comparisons should be treated with caution because the underlying data and methods used in different countries may not be strictly comparable.…”