Fiscal Contracting in Latin America
13 Pages Posted: 17 Sep 2014 Last revised: 20 Mar 2015
Date Written: September 15, 2014
Latin America has long been characterized as a region of high income inequality. In recent years, however, many countries have seen a decrease in income inequality and poverty levels and an increase in economic mobility. Fiscal policies have played a role in achieving these results. One important explanation for changing fiscal policies is the increasing economic and political role played by the growing middle class in shaping the level and quality of collective goods and services and the types of taxes and relative tax burdens to fund these expenditures. Through a process we call “fiscal contracting,” less unequal societies may be willing to pay more in taxes for expanded, relatively universal public services.
Keywords: Fiscal redistribution, taxation, inequality, fiscal contracting, middle class, Latin America
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