The Impact of Taxes and Social Spending on Inequality and Poverty in Latin America: Argentina, Bolivia, Brazil, Mexico, Peru and Uruguay. Introduction to Special Issue

Public Finance Review, Vol 42, Issue 3, 2014

Posted: 11 Apr 2017

See all articles by Nora Lustig

Nora Lustig

Tulane University

Carola Pessino

University of CEMA - Economics

John Scott

Independent

Date Written: 2014

Abstract

How much redistribution and poverty reduction is being accomplished in Latin America through social spending, subsidies, and taxes? Standard fiscal incidence analyses applied to Argentina, Bolivia, Brazil, Mexico, Peru, and Uruguay using a comparable methodology yields the following results. Direct taxes and cash transfers reduce inequality and poverty by nontrivial amounts in Argentina, Brazil, and Uruguay but less so in Bolivia, Mexico, and Peru. While direct taxes are progressive, the redistributive impact is small because direct taxes as a share of GDP are generally 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 more than offset the poverty-reducing impact of cash transfers. When one includes the in-kind transfers in education and health, valued at government costs, they reduce inequality in all countries by considerably more than cash transfers, reflecting their relative size.

Suggested Citation

Lustig, Nora Claudia and Pessino, Carola and Scott, John, The Impact of Taxes and Social Spending on Inequality and Poverty in Latin America: Argentina, Bolivia, Brazil, Mexico, Peru and Uruguay. Introduction to Special Issue (2014). Public Finance Review, Vol 42, Issue 3, 2014, Available at SSRN: https://ssrn.com/abstract=2948949

Nora Claudia Lustig (Contact Author)

Tulane University ( email )

6823 St Charles Ave
New Orleans, LA 70118
United States

Carola Pessino

University of CEMA - Economics ( email )

Buenos Aires
Argentina

John Scott

Independent ( email )

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