26 - 30 september 2016, brussels session 6 issues in ... · 17. indonesia (2012; c): amar, rythia,...

DG DEVCO Staff Seminar on Social Protection - from strategies to concrete approaches -

26 - 30 September 2016, Brussels

SESSION 6 Issues in Fiscal Incidence and Redistribution (Part A)

Jon JELLEMA

Associate Director for Africa, Asia & Europe, CEQ Institute

[email protected] www.commitmentoequity.org

•  SummaryofFiscalRedistribu4on,Inequality,&PovertyinLow-andMiddle-IncomeCountries

•  Howpro-poorisspendingoneduca4onandhealth•  4keyques4ons

Outline

Commitment to Equity Ins2tute

Objec&ve:Tomeasuretheimpactoffiscalpolicyoninequalityandpovertyincountriesacrosstheworld

• Research-basedpolicytools• CEQDataCenteronFiscalRedistribu4on• CEQAdvisoryandTrainingServices• BridgestoPolicy

Ø TwograntsfromBill&MelindaGatesFounda4on$5.5millionfor2014-2020

3

CEQ Ins2tute: Core Staff

• Director:NoraLus4g• DirectorofPolicyArea:LudovicoFeoli• AssociateDirectors:MaynorCabrera,JonJellema,EstuardoMoranandStephenYounger• DataCenterDirector:SeanHiggins•  Communica&onsDirector:CarlosMar4ndelCampo•  ResearchAssociates:RodrigoAranda,KorayCaglayan,EnriquedelaRosa,AliEnami

Inaddi4on:• AdvisoryBoard• NonresidentResearchAssociates(morethan40worldwide)

4

Commitment to Equity Ins2tute

• Workingoncloseto40countries;coversaroundtwothirdsoftheworldpopula4on•  Collabora4veeffortsandpartnershipswithmul4pleorganiza4ons:ADB,AfDB,CAF,ERF,IDB,IMF,ICEFI,OECD,Oxfam,UNDP,WorldBank•  U4lizedbygovernments•  Publica4ons:Handbook,WorkingPaperseries,scholarlypublica4onsinpeer-reviewedjournals,bookchapters,editedvolume(inprogress),blogsandpolicybriefs• Websitewww.commitmentoequity.org

5

6www.commitmentoequity.org

CEQ Assessment: Tools §  CEQHandbook2016:Lus4g,Nora,editor.CommitmenttoEquityHandbook.AGuidetoEs6ma6ngtheImpactofFiscalPolicyonInequalityandPoverty.TulaneUniversity.Fall2016.

Astep-by-stepguidetoapplyingincidenceanalysistoassesstheimpactoffiscalpolicyoninequalityandpovertywithcountrystudiestoillustrate.

§  MasterWorkbook(MWB)

Excelspreadsheetthathousesdetailedbackgroundinforma4onandresultsfromtheCEQanalysisusedasinputsforpolicydiscussions,academicpapersandpolicyreports.Itcontainsinternallinkstoproducesummarytablesautoma4cally.

§  CEQStataPackageAsuiteofStatacommandsthatautomatestheproduc4on/placementofresultsandinputsfortheMasterWorkbook.Thissogwareinnova4onverysignificantlyreducestheprobabilityofcommihngerrorsinthe“copy-and-paste”processandsavesanenormousamountof4mecomparedtobefore.

§  CheckingProtocol

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•  Empiricalresultsfor26countriesbasedonfiscalincidencestudiesfromtheCEQIns4tute(circa2010-2014)•  Threelow-incomecountries:Ethiopia(Hilletal.,2016),Tanzania(Youngeretal.,2016),andUganda(Jellemaetal.,2016)

•  Ninelowermiddle-incomecountries:Armenia(YoungerandKhachatryan,2016),Bolivia(Paz-Araucoetal.,2014),ElSalvador(Beneke,Lus4gandOliva,2014),Georgia(CanchoandBondarenko,2016),Ghana(Youngeretal.,2015),Guatemala(Cabrera,Lus4gandMoran,2015),Honduras(CastañedaandEspino,2015),Indonesia(Amaretal.,2016),andSriLanka(Aruna4lakeetal.,2016)

•  Elevenuppermiddle-incomecountries:Brazil(HigginsandPereira,2014),Colombia(Lus4gandMelendez,2016),CostaRica(SaumaandTrejos,2014),DominicanRepublic(Aristy-Escuderetal.,2016),Ecuador(Llerenaetal.,2015),Jordan(Alametal.,2016),Mexico(Scon,2014),Peru(Jaramillo,2014),Russia(Lopez-Calvaetal.,2016),SouthAfrica(Inchausteetal.,2016),andTunisia(Shimelesetal.,2016)

•  Twohigh-incomecountries:Chile(Mar4nez-Aguilaretal.,2016),andUruguay(Buchelietal.,2014).

•  Oneunclassified:Argen&na(Rossignolo,2016)

8

Forthecurrent2017fiscalyear,low-incomeeconomiesaredefinedasthosewithaGNIpercapita,calculatedusingtheWorldBankAtlasmethod,of$1,025orlessin2015;lowermiddle-incomeeconomiesarethosewithaGNIpercapitabetween$1,026and$4,035;uppermiddle-incomeeconomiesarethosewithaGNIpercapitabetween$4,036and$12,475;high-incomeeconomiesarethosewithaGNIpercapitaof$12,476ormore.(onsultedonJuly13,2016)

Teams and references by country: (in parenthesis: survey year; C=consump2on & I=income) 1.Argen&na(2012-13;I):Rossignolo,D.2016.“Taxes,Expenditures,PovertyandIncomeDistribu4oninArgen4na.”CEQWorkingPaperNo.45,CEQIns4tute,TulaneUniversity.(forthcoming).

Rossignolo,D.2016.CEQMasterWorkbook:Argen4na,February29.CEQIns4tute,TulaneUniversity.

2.Armenia(2011;I):Younger,StephenD.,andArtsviKhachatryan.forthcoming.“FiscalIncidenceinArmenia,”in:Inchauste,G.,Lus4g,N.(Eds.),TheDistribu4onalImpactofFiscalPolicy:ExperiencefromDevelopingCountries.WorldBank,Washington,D.C.(forthcoming).

Younger,S.andA.Khachatryan.2014.CEQMasterWorkbook:Armenia,May31.CEQIns4tute,TulaneUniversityandtheWorldBank.

3.Bolivia(2009;I):PazArauco,Verónica,GeorgeGrayMolina,WilsonJiménezPozo,andErnestoYáñezAguilar.2014.“ExplainingLowRedistribu4veImpactinBolivia.”InLus4g,Nora,CarolaPessinoandJohnScon.2014.Editors.TheRedistribu6veImpactofTaxesandSocialSpendinginLa6nAmerica.SpecialIssue.PublicFinanceReview,May,Volume42,Issue3.(September22,2014).

PazArauco,V.,G.Gray-Molina,W.JimenezandE.Yañez.2014.CEQMasterWorkbook:Bolivia,September22,CEQIns4tute,TulaneUniversity.

4.Brazil(2008-09;I):Higgins,SeanandClaudineyPereira.2014.“TheEffectsofBrazil’sTaxa4onandSocialSpendingontheDistribu4onofHouseholdIncome.”InLus4g,Nora,CarolaPessinoandJohnScon.2014.Editors.TheRedistribu6veImpactofTaxesandSocialSpendinginLa6nAmerica.SpecialIssue.PublicFinanceReview,May,Volume42,Issue3.(November4,2014).

Higgins,S.andC.Pereira.2016CEQMasterWorkbook:Brazil,January4.CEQIns4tute,TulaneUniversity.

5.Chile(2013,I):Marvnez-Aguilar,S.,A.FuchsandE.Or4z-Juarez.2016.“TheImpactofFiscalPolicyonInequalityandPovertyinChile.”CEQWorkingPaperNo.46,CEQIns4tute,TulaneUniversityandWorldBank.(forthcoming).

Marvnez-Aguilar,S.andE.Or4z-Juarez.2016.CEQMasterWorkbook:Chile,inprogress.CEQIns4tute,TulaneUniversityandWorldBank.

6.Colombia(2010,I):Lus4g,NoraandMarcelaMelendez.2015.“TheImpactofTaxesandTransfersonInequalityandPovertyinColombia”.CEQWorkingPaperNo24,CenterforInter-AmericanPolicyandResearchandDepartmentofEconomics,TulaneUniversityandInter-AmericanDialogue.Forthcoming.

Melendez,M.andV.Marvnez.2015.CEQMasterWorkbook:Colombia,December17.CEQIns4tute,TulaneUniversityandInter-AmericanDevelopmentBank.

9

Teams and references by country: (in parenthesis: survey year; C=consump2on & I=income) 7.CostaRica(2010;I):Sauma,JuanandDiegoTrejos.2014.“Socialpublicspending,taxes,redistribu4onofincome,andpovertyinCostaRica.”CEQWorkingPaperNo.18,CenterforInter-AmericanPolicyandResearchandDepartmentofEconomics,TulaneUniversityandInter-AmericanDialogue.

Sauma,P.andJ.D.Trejos.2014.CEQMasterWorkbook:CostaRica,February.CEQIns4tute,TulaneUniversity.

8.DominicanRepublic(2006-07,I):Aristy-Escuder,J.,M.Cabrera,B.Moreno-DodsonandM.E.Sánchez-Marvn.2016.“Fiscalpolicyandredistribu4onintheDominicanRepublic.”CEQWorkingPaperNo37,CEQIns4tute.(forthcoming).Note:budgetarydatawasfor2013.

Aristy-Escuder,J.,M.Cabrera,B.Moreno-DodsonandM.E.Sánchez-Marvn.2016.CEQMasterWorkbook:DominicanRepublic,May10.CEQIns4tute,TulaneUniversityandtheWorldBank.

9.Ecuador(2011-12,I):LlerenaPinto,FreddyPaul,MaríaChris4naLlerenaPinto,RobertoCarlosSaáDaza,andMaríaAndreaLlerenaPinto.“SocialSpending,TaxesandIncomeRedistribu4oninEcuador.”CEQWorkingPaperNo.28,CenterforInter-AmericanPolicyandResearchandDepartmentofEconomics,TulaneUniversityandInter-AmericanDialogue.

Llerena,F.,M.C.Llerena,M.A.LlerenaandR.Saá.2014.CEQMasterWorkbook:Ecuador,November7.CEQIns4tute,TulaneUniversity.

10.ElSalvador(2011;I):Beneke,M.andJ.A.Oliva.2015.CEQMasterWorbook:Elsalvador,July10.CEQIns4tute,TulaneUniversityandIns4tutoCentroamericanodeEstudiosFiscalesandInterna4onalFundforAgriculturalDevelopment.

11.Ethiopia(2011;C):Hill,Ruth,GabrielaInchauste,NoraLus4g,EyasuTsehayeandTassewWoldehanna.forthcoming.“AFiscalIncidenceAnalysisforEthiopia,”in:Inchauste,G.,Lus4g,N.(Eds.),TheDistribu4onalImpactofFiscalPolicy:ExperiencefromDevelopingCountries.WorldBank,Washington,D.C(forthcoming).

Hill,R.,E.TsehayeandT.Woldehanna.2014.CEQMasterWorkbook:Ethiopia,September28.CEQIns4tute,TulaneUniversityandtheWorldBank.

10

Teams and references by country: (in parenthesis: survey year; C=consump2on & I=income) 12.EuropeanUnion(2011,I):EUROMODsta4s4csonDistribu4onandDecomposi4onofDisposableIncome,accessedathnp://www.iser.essex.ac.uk/euromod/sta4s4cs/usingEUROMODversionno.G2.0.

13.Georgia(2013;I):Cancho,CesarandElenaBondarenko.forthcoming.“TheDistribu4onalImpactofFiscalPolicyinGeorgia,"in:Inchauste,G.,Lus4g,N.(Eds.),TheDistribu4onalImpactofFiscalPolicy:ExperiencefromDevelopingCountries.WorldBank,Washington,D.C(forthcoming).

Cancho,C.andE.Bondarenko.2015.CEQMasterWorkbook:Georgia,December31.CEQIns4tute,TulaneUniversityandtheWorldBank.

14.Ghana(2012-13;C):Younger,S.,E.Osei-AssibeyandF.Oppong.2015.“FiscalIncidenceinGhana.”CEQWorkingPaperNo.35,CenterforInter-AmericanPolicyandResearchandDepartmentofEconomics,TulaneUniversity,IthacaCollege,UniversityofGhanaandWorldBank.

Younger,S.,E.Osei-AssibeyandF.Oppong.2016.CEQMasterWorkbook:Ghana,February10.CEQIns4tute,TulaneUniversity.

15.Guatemala(2011;I):Cabrera,MandH.E.Morán.2015.CEQMasterWorkbook:Guatemala,May6.CEQIns4tute,TulaneUniversity,Ins4tutoCentroamericanodeEstudiosFiscalesandInterna4onalFundforAgriculturalDevelopment.

16.Honduras(2011;I):Castañeda,R.andI.Espino.2015.CEQMasterWorkbook:Honduras,August18.CEQIns4tute,TulaneUniversity,Ins4tutoCentroamericanodeEstudiosFiscalesandInterna4onalFundforAgriculturalDevelopment.

Castañeda,R.andI.Espino.2015.CEQMasterWorkbook:Honduras,August18.CEQIns4tute,TulaneUniversity,Ins4tutoCentroamericanodeEstudiosFiscalesandInterna4onalFundforAgriculturalDevelopment.

17.Indonesia(2012;C):Amar,Rythia,JonJellema,andMathewWai-Poi.forthcoming.“TheDistribu4onalImpactofFiscalPolicyinIndonesia,”in:Inchauste,GabrielaandNoraLus4g(Eds.),TheDistribu4onalImpactofFiscalPolicy:ExperiencefromDevelopingCountries.WorldBank,Washington,D.C(forthcoming).

Jellema,J.,M.Wai_PoiandR.Amar.2015.CEQMasterWorkbook:Indonesia,February26.CEQIns4tute,TulaneUniversityandtheWorldBank.

11

Teams and references by country: (in parenthesis: survey year; C=consump2on & I=income)

18.Jordan(2010-11;C):Alam,ShammaA.,GabrielaInchauste,andUmarSerajuddin.forthcoming.“TheDistribu4onalImpactofFiscalPolicyinJordan,”in:Inchauste,G.,Lus4g,N.(Eds.),TheDistribu4onalImpactofFiscalPolicy:ExperiencefromDevelopingCountries.WorldBank,Washington,D.C(forthcoming).

Abdel-Halim,M.,S.AdeebAlam,Y.Mansur,U.SerajuddinandP.Verme.2016.CEQMasterWorkbook:Jordan,March8.CEQIns4tute,TulaneUniversityandtheWorldBank.

19.Mexico(2010;C&I):Scon,John.2014.“Redistribu4veImpactandEfficiencyofMexico’sFiscalSystem.”InLus4g,Nora,CarolaPessinoandJohnScon.2014.Editors.TheRedistribu6veImpactofTaxesandSocialSpendinginLa6nAmerica.SpecialIssue.PublicFinanceReview,May,Volume42,Issue3.(September2013).

Scon,J.2013.CEQMasterWorkbook:Mexico,September2.CEQIns4tute,TulaneUniversity.

20.Peru(2009;I):Jaramillo,Miguel.2014.“TheIncidenceofSocialSpendingandTaxesinPeru.”InLus4g,Nora,CarolaPessinoandJohnScon.2014.Editors.TheRedistribu6veImpactofTaxesandSocialSpendinginLa6nAmerica.SpecialIssue.PublicFinanceReview,May,Volume42,Issue3.(May1,2013).

Jaramillo,M.2015.CEQMasterWorkbook:Peru,August7.CEQIns4tute,TulaneUniversity.

21.Russia(2010;I):Lopez-Calva,LuisF.,NoraLus4g,MikhailMatytsin,andDariaPopova.forthcoming.“WhoBenefitsfromFiscalRedistribu4oninRussia?,”in:Inchauste,G.,Lus4g,N.(Eds.),TheDistribu4onalImpactofFiscalPolicy:ExperiencefromDevelopingCountries.WorldBank,Washington,D.C.(forthcoming).

Malytsin,M.andD.Popova.2016.CEQMasterWorkbook:Russia,March17.CEQIns4tute,TulaneUniversityandtheWorldBank.

12

Teams and references by country: (in parenthesis: survey year; C=consump2on & I=income)

22.SouthAfrica(2010-11;I):Inchauste,Gabriela,NoraLus4g,MashekwaMaboshe,CatrionaPurfieldandIngridWollard.forthcoming.“TheDistribu4onalImpactofFiscalPolicyinSouthAfrica,”in:Inchauste,G.,Lus4g,N.(Eds.),TheDistribu4onalImpactofFiscalPolicy:ExperiencefromDevelopingCountries.WorldBank,Washington,D.C.(forthcoming).

Inchauste,G.,N.Lus4g,M.Maboshe,C.Purfield,I.WoolardandP.Zikhali.2016.CEQMasterWorkbook:SouthAfrica,March6.CEQIns4tute,TulaneUniversityandtheWorldBank.

23.SriLanka(2010;C):Aruna4lake,Nisha,GabrielaInchausteandNoraLus4g.forthcoming.“TheIncidenceofTaxesandSpendinginSriLanka,”in:Inchauste,G.,Lus4g,N.(Eds.),TheDistribu4onalImpactofFiscalPolicy:ExperiencefromDevelopingCountries.WorldBank,Washington,D.C.(forthcoming).

Aruna4lake,N.,C.Gomez,N.PereraandK.Anygalle.2016.CEQMasterWorkbook:SriLanka,March10.CEQIns4tute,TulaneUniversityandtheWorldBank.

24.Tanzania(2011-12;C):Younger,Stephen,FloraMyamba,andKennethMdadila.2016.“FiscalIncidenceinTanzania.”CEQWorkingPaperNo.36,CenterforInter-AmericanPolicyandResearchandDepartmentofEconomics,TulaneUniversity,IthacaCollegeandREPOA.

Younger,S.,F.Myamba,andK.Mdadila.2016.CEQMasterWorkbook:Tanzania,June1st.CEQIns4tute,TulaneUniversity.

25.Tunisia(2010,C):Shimeles,Abebe,AhmedMoummi,NizarJouiniandNoraLus4g.2016.“FiscalIncidenceandPovertyReduc4on:EvidencefromTunisia,”CEQWorkingPaperNo.38,CommitmenttoEquityIns4tute,TulaneUniversity.(forthcoming).

Shimeles,A.,A.Moummi,N.JouiniandN.Lus4g.2015.CEQMasterWorkbook:Tunisia,October1.CEQIns4tute,TulaneUniversityandAfricanDevelopmentBank.

26.UnitedStates(2011,I):Higgins,Sean,NoraLus4g,WhitneyRubleandTimothySmeeding(2015),“ComparingtheIncidenceofTaxesandSocialSpendinginBrazilandtheUnitedStates”,ReviewofIncomeandWealth,forthcoming.

27.Uruguay(2009;I):Bucheli,Marisa,NoraLus4g,MáximoRossi,andFlorenciaAmábile.2014.“SocialSpending,TaxesandIncomeRedistribu4oninUruguay.”In:Lus4g,Nora,CarolaPessinoandJohnScon.2014.Editors.TheRedistribu6veImpactofTaxesandSocialSpendinginLa6nAmerica.SpecialIssue.PublicFinanceReview,May,Volume42,Issue3.(August18,2014)

Bucheli,M.,N.Lus4g,M.RossiandF.Amábile.2014.CEQMasterWorkbook:Uruguay,August18.CEQIns4tute,TulaneUniversity.

13

Household surveys by country, year

1.   Argen&na(2012-13;I):EncuestaNacionaldeGastodelosHogares2012-2013

2.   Armenia(2011;I):IntegratedLivingCondi4onsSurvey2011

3.   Bolivia(2009;I):EncuestadeHogares2009

4.   Brazil(2008-09;I):PesquisadeOrçamentosFamiliares2008-2009

5.   Chile(2013,I):EncuestadeCaracterizaciónSocial2013

6.   Colombia(2010,I):EncuestaNacionaldeCalidaddeVida2010

7.   CostaRica(2010;I):EncuestaNacionaldeHogares2010

8.   DominicanRepublic(2006-07;I):EncuestaNacionaldeIngresosyGastosdeLosHogares2006-2007

9.   Ecuador(2011-12,I):EncuestaNacionaldeIngresosyGastosdelosHogaresUrbanoyRural,2011-2012

10.   ElSalvador(2011;I):EncuestadeHogaresDePropositosMul4ples2011

11.   EuropeanUnion:seeEUROMODsta4s4csonDistribu4onandDecomposi4onofDisposableIncome, hnp://www.iser.essex.ac.uk/euromod/sta4s4cs

12.   Ethiopia(2010-11;C):HouseholdConsump4onExpeditureSurvey2010-2011andWelfareMonitoringSurvey2011G

13.   Georgia(2013;I):IntegratedHouseholdSurvey2013

14.   Ghana(2012-13;C):LivingStandardsSurvey2012-2013

15.   Guatemala(2011;I):EncuestaNacionaldeCondicionesdeVida2011

Note:Theleners"I"and"C"indicatethatthestudyusedincomeorconsump4ondata,respec4vely.

14

Household surveys by country, year

16.   Honduras(2011;I):EncuestaPermanentedeHogaresdePropósitosMúl4ples2011

17.   Indonesia(2012;C):SurveiSosial-EkonomiNasional2012

18.   Jordan(2010-11;C):HouseholdExpenditureandIncomeSurvey2010-2011

19.   Mexico(2010;C&I):EncuestaNacionaldeIngresoyGastodelosHogares2010

20.   Peru(2009;I):EncuestaNacionaldeHogares2009

21.   Russia(2010;I):RussianLongitudinalMonitoringSurveyofHigherSchoolofEconomics2010

22.   SouthAfrica(2010-11;I):IncomeandExpenditureSurvey2010-2011

23.   SriLanka(2009-10;C):HouseholdIncomeandExpenditureSurvey2009-2010

24.   Tanzania(2011-12;C):HouseholdBudgetSurvey2011-2012

25.   Tunisia(2010;C):Na4onalSurveyofConsump4onandHouseholdLivingStandards2010

26.   UnitedStates(2011,I):CurrentPopula4onSurvey2011

27.   Uruguay(2009;I):EncuestaCon4nuadeHogares2009

Note:Theleners"I"and"C"indicatethatthestudyusedincomeorconsump4ondata,respec4vely.

15

Summaryof

FISCALREDISTRIBUTION,INEQUALITY,&POVERTYinLow-andMiddle-IncomeCountries

16

Based on: Lus4g, Nora. “Fiscal Redistribu4on in Low andMiddle Income Countries.” Chapter 8 in Lus4g (editor)CommitmenttoEquityHandbook.AGuidetoEs6ma6ngtheImpactofFiscalPolicyonInequalityandPoverty,TulaneUniversityandtheWorldBank,Fall2016.

MARKETINCOME

DISPOSABLEINCOME

PLUSDIRECTTRANSFERSMINUSDIRECTTAXES

PLUSINDIRECTSUBSIDIESMINUSINDIRECTTAXES

CONSUMABLEINCOME

PLUSMONETIZEDVALUEOFPUBLICSERVICES:EDUCATION&HEALTH

FINALINCOME

CEQ Assessment:IncomeConcepts

17

HigginsandLus4g.“AAlloca4ngTaxesandTransfers,Construc4ng Income Concepts, and Comple4ngSec4on C of CEQ Master Workbook” in Lus4g(editor) Commitment to Equity Handbook. A Guideto Es6ma6ng the Impact of Fiscal Policy onInequalityandPoverty,TulaneUniversity,Fall2016.

18

0.25

0.35

0.45

0.55

0.65

0.75

0.85

Marketincomepluspensions Disposableincome Consumableincome Finalincome

GiniCoefficient

Argen&na(2012) Armenia(2011) Bolivia(2009)Brazil(2009) Chile(2013) Colombia(2010)CostaRica(2010) DominicanRepublic(2013) Ecuador(2011)ElSalvador(2011) Ethiopia(2011) Georgia(2013)Ghana(2013) Guatemala(2011) Honduras(2011)Indonesia(2012) Jordan(2010) Mexico(2010)Peru(2009) Russia(2010) SouthAfrica(2010)SriLanka(2010) Tanzania(2011) Tunisia(2010)Uruguay(2009)

Marketincome(pluscontributorypensions)

Disposableincome Consumableincome

Finalincome

Fiscal Policy and Inequality – Contributory pensions as deferred income

Source:Lus4g(2016)

Redistribu2ve effect (Change in Gini points: market income plus pensions and market income to disposable income, circa 2010)

19Source:Lus4g(2016)

0.000.100.200.300.400.500.600.700.800.90

-0.20-0.18-0.16-0.14-0.12-0.10-0.08-0.06-0.04-0.020.00

Red

istribu&

veeffe

ct-m

arketincom

etodispo

sable

(rankedbyredistribu&veeffect(lelhandscale);Ginicoefficientsrighthandscale)

Contributorypensionsasdeferredincome Contributorypensionsasdirecttransfer

Ginimarketincomepluspensions Ginimarketincome

Rich countries

20

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7UnitedStates

Israel

UnitedKingdo

m

Canada

Greece

Spain

Australia

Norway

Korea

Poland

Taiwan

Germ

any

Finland

Ireland

SlovakRep

ublic

Japan

Austria

Nethe

rland

s

Swed

en

Denm

ark

Luxembo

urg

Switzerland

Ginicoe

fficien

tDistribu&onofincomesinselectedcountries,beforeandaler

taxesandtransfers

pre_ineq

post_ineq

redistribu4on

More social spending, more redistribu2on


ARG

ARM BOL

BRA

CHLCOL

CRI

DOMECU

SLV

GHAGTM HND

IND JOR

MEX

PER

RUS

ZAF

LKA

TZA

TUN

URYy=0.9253x***-0.0287*

(7.05)(-1.99)R²=0.6933

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

0.18

0.20

0% 5% 10% 15% 20% 25%

Redistrib

u&veeffe

ct

Socialspending

ETH


ARG

ARM

BOL

BRACHI

COL

CRIDOMECU

SLVETH

GEO

GHA GTM

HNDINDJOR

MEX

PER

RUS

ZAF

LKA

TZATUN

URY

y=0.0952x*-0.0184(1.76)(-0.70)

R²=0.1183

0.00

0.04

0.08

0.12

0.16

0.20

0.20 0.35 0.50 0.65 0.80

Red

istribu&

veeffe

ct

Ginimarketincomepluspensions

More unequal, more redistribu2on

In sum…

•  InNOcountrydoesinequalityincreasesasaresultoftaxes,subsidiesandsocialspending

Ø Fiscalpolicyisalwaysequalizing

Ø Themoreunequal,themorefiscalredistribu4on

23

CEQAssessmentResults

FISCALREDISTRIBUTION&POVERTY

•  Fiscalpolicycanbeequalizingbutpovertyincreasing(intermsofthepoor’sabilitytoconsumeprivategoodsandservices):Ø 1.25/dayline:Ethiopia,Ghana,Guatemala,Tanzania

Ø 2.50/dayline:Armenia,Bolivia,Ethiopia,Ghana,Guatemala,Honduras,SriLanka,Tanzania

Ø 4/dayline:alloftheaboveplusArgen4na,Brazil,CostaRicaandTunisia

•  Thisworrisomeresultstemsmainlyfromconsump4ontaxes

25


Fiscal Policy and Poverty Reduc2on (Change in Headcount Ratio from Market to Consumable Income (Poverty line $1.25 / day

2005 ppp; Contributory Pensions as Deferred Income; in %)

-0.2%-1.7%-3.3%-8.3%-10.3%-11.5%-16.1%-16.5%-18.0%-18.5%

-24.9%-31.8%-33.9%-34.6%

-44.9%-45.5%-45.9%-50.6%-56.4%

-69.6%-69.8%-70.7%

-88.2%-97.0%

-36.2%

17.8%13.3%

4.2%2.4%

-12.7%

-8.8%-2.3%

-14.1%-14.1%

-24.6%

-7.5%-15.7%

-35.0%

-53.8%

-37.8%

-22.7%

-53.8%

-36.2%-42.7%

-76.4%

-66.2%

-54.2%

-82.0%-82.6%

-29.4%

-120%

-100%

-80%

-60%

-40%

-20%

0%

20%

(rankedbypovertyreduc&onin%;povertyline$1.252005PPP/day)

Market income plus pensions to disposable income Market income plus pensions to consumable income




1.5% 1.1% 0.9%

-1.0%-1.8%-2.8%-3.3%-6.5%

-7.0%-7.3%-7.7%-8.3%-10.1%-10.4%-14.9%

-21.4%-22.0%-24.0%-27.8%-28.5%

-35.9%-40.6%

-58.4%-61.0%

-71.4%

-18.7%

9.1%5.7% 3.1%

-2.9%

1.1%5.5%

0.5%

-0.2%

-9.0%-4.4%

11.4%

-25.2%

-0.8%

3.3%

-15.1%-10.6%

-4.7%

-34.8%

-22.2%

-35.1%-29.1%

-23.3%

-51.8%

-35.4%

-51.1%

-12.6%

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%(rankedbypovertyreduc&onin%;povertyline$2.502005PPP/day)

Marketincomepluspensionstodisposableincome Marketincomepluspensionstoconsumableincome




4.3%2.0%1.0%0.7%0.4%

-0.1%-0.2%-0.4%

-1.7%-2.1%-2.7%-2.7%-2.9%-4.7%-5.6%-6.2%

-8.0%-8.5%

-12.9%-13.9%

-26.8%

-41.0%-41.2%-42.0%

-9.0%

0.0%2.7%6.6%

2.8%

13.7%

1.0%1.9%

-0.8%

4.1% 4.9%

-2.3%

3.8%0.4%1.9%

-8.4%

4.4%

-3.5%-0.3%

8.1%

-15.6%

2.8%

-12.5%

1.6%

-24.2%-21.8%

-1.2%

0.0%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%(rankedbypovertyreduc&onin%;povertyline$4.002005PPP/day)

Marketincomepluspensionstodisposableincome Marketincomepluspensionstoconsumableincome

Analyzingtheimpactontradi4onalpovertyindicatorscanbemisleading

Ø Fiscalsystemscanshowareduc4oninpovertyandyetasubstan4alshareofthepoorcouldhavebeenimpoverishedbythecombinedeffectoftaxesandtransfers

29

HigginsandLus4g(2016)Canapoverty-reducingandprogressivetaxandtransfersystemhurtthepoor?JournalofDevelopmentEconomics122,63-75,2016

30

HigginsandLus4g.2016.Canapovertyreducingandprogressivetaxandtransfersystemhurtthepoor?JournalofDevelopmentEconomics122,63-75,2016

•  Figeenoftheeighteencountrieswithareduc4oninpovertyandinequalityduetothetaxandtransfersystemexperiencedvariousdegreesoffiscalimpoverishment.•  Intencountries—Armenia,Bolivia,Brazil,ElSalvador,Guatemala,Indonesia,Mexico,Russia,SriLanka,andTunisia—betweenone-quarterandtwo-thirdsofthepost-fiscpoorlostincometothefiscalsystem.•  Inthethreecountrieswheretheheadcountra4orose(Ethiopia,GhanaandTanzania),thepropor4onofthepoorwhowereimpoverishedbythefiscalsystemisstaggering(above75%).•  InArmenia,Ethiopia,Indonesia,Tunisia,andRussia,between25%and50%ares4llfiscallyimpoverishedwhenthemone4zedvalueofeduca4onandhealthservicesareincludedastransfers

31

Lus4g.2016.“TheSDG’s,Domes4cResourceMobiliza4onandthePoor,”backgroundpaperfortheExpertGroupMee4ng:“Strategiesforeradica4ngpovertytoachievesustainabledevelopmentforall,”BackgroundpaperforWorldDevelopmentReport2017GovernanceandtheLaw,June

320

5

10

15

20

25

30

35

40

1 2 3 4 5 6 7 8 91011121314151617181920212223242526272829303132333435363738394041424344454647484950

consumableincome

income

povertyline

Our toy example from earlier today…

Ø Extremecaremustbetakenwithemphasizingdomes4cresourcemobiliza4ontoachieveSDGs

Ø Mustassesstheimpactonthepooroftaxandsubsidyreforms,otherwiseonemaybetakingawayfromthepoormorethanistransferredtothem

Ø Impactonthepoorofincreasingtaxesrequirestheuseofadequateindicators;conven4onalmeasuresofinequalityandpovertycanbeawfullymisleading

Ø FiscalImpoverishmentIndexfulfillsalltherequirementstoobtainanaccurateassessmentoftheimpactoffiscalchangesonthepoor

33

Lus4g.2016.“TheSDG’s,Domes4cResourceMobiliza4onandthePoor,”backgroundpaperfortheExpertGroupMee4ng:“Strategiesforeradica4ngpovertytoachievesustainabledevelopmentforall,”BackgroundpaperforWorldDevelopmentReport2017GovernanceandtheLaw,June

Main messages

1.  Analyzingthetaxsidewithoutthespendingside,orviceversa,canbemisleading

Ø Taxescanbeunequalizingbutspendingsoequalizingthattheunequalizingeffectoftaxesismorethancompensated

Ø Taxescanberegressivebutwhencombinedwithtransfersmakethesystemmoreequalizingthanwithouttheregressivetaxes

Ø Transferscanbeequalizingbutwhencombinedwithtaxes,post-fiscpovertycanbehigher

34

Main messages

2.  Analyzingtheimpactoninequalityonlycanbemisleading

Ø Fiscalsystemscanbeequalizingbutpovertyincreasing

35

Main messages

3.  Analyzingtheimpactontradi4onalpovertyindicatorscanbemisleading

Ø Fiscalsystemscanshowareduc4oninpovertyandyetasubstan4alshareofthepoorcouldhavebeenimpoverishedbythecombinedeffectoftaxesandtransfers

36

How pro-poor is spending on educa2on

and health

Classifica2on •  Pro-poorandequalizing,percapitaspending

declineswithincome

•  Neutralinabsolutetermsandequalizing,samepercapitaforall

•  Equalizingbutnotpro-poor,percapitaspendingasashareofmarketincomedeclineswithincome

•  Unequalizing,percapitaspendingasashareofmarketincomeincreaseswithincome 38

Main results

Educa4onspendingonprimaryandsecondaryschoolingperpersontendstobepro-poororneutralinabsoluteterms…...withtheexcep4onofEthiopiawhere,althoughequalizing,percapitaspendingonsecondaryeduca4onincreaseswithincome

Ø Aremiddle-classesop4ngoutinmiddleandhighincomecountries?

Ter4aryeduca4onspendingisnotpro-poorbutitisequalizing(surprised?)exceptforEthiopia,Ghana,GuatemalaandTanzania,whereitisunequalizing


Main results

Healthspendingperpersontendstobepro-poororneutralinabsoluteterms…….exceptforElSalvador,Ethiopia,Guatemala,Indonesia,PeruandTanzaniawherealthoughnotunequalizingpercapitaspendingincreaseswithincome….…andforJordan,wheregovernmentspendingonhealthisunequalizing.


In conclusion…

•  FiscalsystemsarealwaysequalizingbutcanogenreducethepurchasingpowerofthepoorØ Warning:unintendedconsequenceofthedomes4cresourcemobiliza4onagendacanbemakingthepoorworseoff

•  Spendingoneduca4onandhealthisogenpro-poorandalmostuniversallyequalizingØ Warning:isthisfavorableresultbecausemiddle-classesandtherichareop4ngout?

•  ReassuringresultsØ Redistribu4veeffectincreaseswithsocialspendingØ SocialspendingasashareofGDPincreaseswithinequalityØ Themoreunequal,themoreredistribu4on

41

Four Key Ques2ons

Basedon:Enami,Ali,NoraLus4gandRodrigoAranda.“Analy4calFounda4ons:MeasuringtheRedistribu4veImpactofTaxesandTransfers”Chapter6inLus4g(editor)CommitmenttoEquityHandbook.AGuidetoEs6ma6ngtheImpactofFiscalPolicyonInequalityandPoverty,TulaneUniversity,Fall2016.Pleaseciteasshown.

Fiscal Policy and Inequality Four Key Ques2ons

§ Doesthenetfiscalsystemdecreaseinequality?

§  Isapar4culartaxortransferequalizingorunequalizing?

§ Whatisthecontribu4onofapar4culartaxortransfer(oranycombina4onofthem)tothechangeininequality?

§ Whatistheinequalityimpactifoneincreasesthesizeofatax(transfer)oritsprogressivity?

43






44

Does the net fiscal system decrease inequality?

45

Let’sdefinetheRedistributiveEffectofthenetfiscalsystemas

𝑹𝑬𝑵 = 𝑮𝒙 − 𝑮𝑵Where𝑮𝒙 𝒂𝒏𝒅 𝑮𝑵arethepre-tax-pre-transferGinicoefficientandpost-tax-post-transferGini,respectively


46

The image cannot be displayed. Your computer may not have enough memory to open the image, or the image may have been corrupted. Restart your computer, and then open the file again. If the red x still appears, you may have to delete the image and then insert it again.


47


48

•  It’scomplicated:

Ø Afiscalsystemwitharegressivetaxcanbeequalizingaslongastransfersareprogressiveandlarge(rela4vely),and…

Ø …Afiscalsystemwitharegressivetaxthatcollectsmorerevenuesthanalessregressiveonemaybemoreequalizing

49







50

§  Ifthereisataxandatransfer,then…Ø …Aregressivetaxcanbeequalizinginthesensethatthereduc4onininequalitycanbelargerwiththetaxthanwithoutit

Is a par2cular tax or transfer equalizing?

51

Lambert’s Conundrum Path Dependency

§  Ifataxisregressivevis-à-vistheoriginalincomebutprogressivewithrespecttothelessunequallydistributedpost-transferincome

Ø Regressivetaxescanexertanequalizingeffectoveranabovetheeffectofprogressivetransfers

Ø Notethatins4tu4onalpathdependencyisnotthesameasmathema4calpathdependency

52

Equalizing Regressive Taxes Exist in Real Life

§  TheUSandtheUKhadregressiveequalizingtaxesinthepast(O'Higgins&Ruggles,1981andRuggles&O’Higgins,1981)

§ Chile’s1996fiscalsystemhadequalizingregressivetaxes(Engeletal.,1999)•  Redistribu4veEffectofNetFiscalSystem(taxesandtransferstogether=0.0583(declineinGinipoints)

•  Redistribu4veEffectofSystemwithTaxesonly=-0.0076•  Redistribu4veEffectofSystemwithTransfersbutwithoutTaxes=0.0574

Ø Notethat0.0583>0.0574§ CEQsforChile2013andSouthAfrica2010alsoshowthatregressiveconsump4ontaxesareequalizing

53

Path Dependency Underscores the Importance of the Analysis Being Comprehensive

§ Obviousreason•  Tocapturethefulleffectofthenetfiscalsystem

§ Moresubtlebutfundamentalreason

Ø Assessingtheprogressivityofataxoratransferinisola4oncangivethewronganswertotheques4on:Isthetaxorthetransferequalizing?

Ø ThinkoftheexampleofChileandSouthAfricajustshownabove

54






55

What is the contribu2on of a par2cular tax or transfer to the change in inequality? §  Sequen4almethod•  Maygivethewronganswertothe“withoutvs.withcomparison”becauseitignorespathdependency

Ø Marginalcontribu&onmethod(sameforpoverty)•  Givescorrectanswertothe“withoutvs.withcomparison”butdoesnotfulfilltheprincipleofaggrega4on:i.e.,thesumofthemarginalcontribu4onswillnotequalthetotalchangeininequality(exceptbycoincidence)

§ AverageContribu4onwithallpossiblepathsconsidered(Shapleyvalue)•  Fulfillstheprincipleofaggrega4on,takescareofpathdependencybutthesignmaybedifferentfromthemarginalcontribu4on=>problema4c?

56






57

What is the inequality impact if one increases the size of a tax (transfer) or its progressivity?

§  It’scomplicated….•  Increasingtheprogressivityofatax:equalizing•  Increasingthesizeofatax:whetherequalizingornotdependsonthesizeandprogressivityoftransfers

58

Progressivityvs.SizeofInterven&on:ASystemwithOneTaxandOneTransfer

59

•  Inasystemwithonetaxandonetransfer:

ρρ K

B

K

B

KT

BTXBXT bb

bg

bgGGMC +

−+−

+==−=Π

+−+ 11...

•  Gehngthepar4alderiva4ves:

)1( 2

)1(

bgMC

K

B

KTTbb

g +−Π ++

=∂

∂ ρ

bgg

KT

TMC+−

=∂

∂

Π 1

References

•  Duclos,Jean-YvesandAbdelkrimAraar.2007.PovertyandEquity:Measurement,PolicyandEs6ma6onwithDAD(Vol.2).Springer.Chapters7and8.(availableonline)

•  Lambert,PeterJ.(2001).TheDistribu6onandRedistribu6onofIncome:AMathema6calAnalysis.ManchesterUniversityPress.ThirdEdi4on.Chapter11.(notavailableonline)

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