Social security, income taxation and poverty alleviation

In this paper I consider the normative arguments that justify a public social security system as a redistributive device when goverment is concerned with individual utility and poverty. Redistribution can be done using social security, income taxation or both. The main objective of this paper is to show how the consideration of a planner that cares about poverty and utility increases the desirability of social with respect to the case when the planner only cares about utility.Welfarism, poverty, income taxation, social security

Measuring distributional effects of fiscal reforms

The purpose of this paper is to provide an overview of how to analyse the distributional effects of fiscal reforms. Thereby, distributional e¤ects shall be differentiated by four subconcepts, i.e. 1.) the traditional concept of inequality, 2.) the rather novel concept of polarisation, 3.) the concept of progression in taxation, and 4.) the concepts of income poverty and richness. The concept of inequality and the concept of income poverty are the by far most widely applied concepts in empirical analyses, probably since they appear to be the most transparent ones in their structure as well as the most controversial ones in political affairs. However, the concepts of richness, polarisation and progression in taxation shall additionally be subject of this analysis, since they appear to be useful devices on the course of analysing cause and effect of the other two concepts. --Inequality,polarisation,progression,poverty,richness

Poverty-Decreasing Indirect Tax Reforms: Evidence from Tunisia

This paper suggests a methodology to identify socially-desirable directions for poverty-alleviating tax reforms. The cost-benefit ratio of increasing any commodity-tax rate is derived from the minimization of a poverty measure subject to a revenue requirement for the government. Further, to avoid the arbitrariness of choosing a poverty line and a poverty measure, the search for a poverty-reducing tax reform is done "robustly", among other things by increasing progressively the ethical content of a pre-defined class of poverty measures. The methodology is illustrated using data from Tunisia. The results suggest that poverty could be dropped for a large class of poverty indices and a wide range of poverty lines by raising -at constant fiscal revenue- the subsidy rate on hard wheat and mixed oils and by decreasing the one on sugar and milk.Poverty alleviation, Indirect taxation, Targeting, Tunisia

Does Inequality Matter for Poverty Reduction? Evidence from Pakistan’s Poverty Trends

The paper explores the linkages between poverty, growth and inequality in the context of Pakistan. Time series macro data are used for the period 1979 to 2002. Consistent poverty and inequality measures are interpolated to facilitate the estimation of poverty elasticity with respect to growth and inequality in a multivariate regression framework. The paper also attempts to find out macroeconomic and structural correlates of inequality. The empirical findings—high poverty elasticity with respect to inequality measures—confirm the importance of inequality in poverty reducing effort. Inflation, sectoral wage gap, and terms of trade in favour of manufacturing exacerbate inequality, while progressive taxation, investment and development expenditure on social services play a significant role in reducing inequality. The results also indicate a positive correlation between per capita GDP and income inequality.Pakistan, Poverty Trend, Income Distribution, Poverty Elasticity with respect to Growth and Inequality

Fiscal policy and indeterminacy in models of endogenous growth

This paper investigates the dynamic behavior of two-sector models of endogenous growth with sector-specific external effects, and government expenditure financed by distortionary taxation. When this type of external effect is combined with a sufficient degree of capital taxation in a Lucas–Uzawa endogenous growth model, continua of equilibria will emerge in the region of the balanced growth paths. By contrast, indeterminacy is not possible when either sector-specific external effects or factor taxation are added to the model in isolation. In the second part of the paper, we demonstrate that if labor supply is endogenous, indeterminacy can be consistent with much lower degrees of increasing returns to scale. Furthermore, certain types of fiscal policy will be associated with multiple balanced growth paths and the existence of a poverty trap. Finally, in the last part of the paper, we demonstrate that if physical capital is employed in both sectors of the economy, indeterminacy will emerge for varying combinations of factor taxation and external effects, even when returns to scale are constant at the social level

Local taxation, spending and poverty : new choices and tax justice

In the environment of the 2014 Independence Referendum, a number of key questions have been raised about the future Scotland we want to see and live in. Core to such discussions have been the interventions on wealth creation and benefits, by the leaders of the Conservatives and Labour Parties in Scotland, respectively. However, and as rigorously debated in the Whose Economy? Seminar Series (Danson and Trebeck, 2011), such questions need to be considered in their wider contexts to identify and analyse fully all aspects of ‘who pays?’ and ‘who benefits?’. Indeed, several of the papers to that seminar series echoed previous classical work on poverty and the welfare state by Townsend, Abel-Smith and others which confirmed there are some long-standing myths to be addressed. These commentaries have suggested that all is not what it seems in the review of statistics of income and benefits, and robust, objective and clinical assessment of the dat

Cashew Production, Taxation, and Poverty in Guinea-Bissau

Agriculture is the engine of Guinea-Bissau’s economy. The sector relies mainly on cashew nuts, rice, and the subsistence production of food crops. Cashews represent 90 percent of the country’s exports and the principal source of income in rural areas. Unfortunately, cumbersome administrative arrangements, weak legal systems, and an absence of credit often lead to high transaction costs for cashew buyers and exporters, which help decrease the farm-gate price of the raw nuts. This chapter provides a review of the cashew sector in Guinea-Bissau, as well as estimates of the likely impact of changes in farm-gate prices and export taxes on poverty among cashew producers and in the country as a whole. The chapter also notes that over the last three decades, the production of rice has significantly decreased in favor of cashew farming. This situation represents a threat to food security. For the rural sector to ensure food security and create new jobs, policymakers would need to adopt a coherent agrarian development strategy in the context of the PRSP, which would aim at rehabilitating and encouraging rice production, and also promoting the processing of raw cashews into exportable cashew kernels, in order to generate more value added in the cashew sector.Cashew nuts; export tax; poverty; Guinea-Bissau

Inequality, poverty, and the Kuznets curve in Spain : 1850-2000.

Economic rather than political forces appear to dominate inequality trends in Spain. Inequality evolution fits a Kuznets curve. Wars increased inequality but had non-permanent effects, while progressive taxation had no impact until 1980, at odds with Atkinson, Piketty, Saez and associates' findings. A substantial fall in absolute poverty resulted from growth but also from inequality reduction in the interwar period and the late 1950s. Rising inequality and extreme poverty are not found at the roots of the Spanish Civil War. Between the mid 1950s and 1974, inequality contraction and absolute poverty eradication represented a major departure from Latin America's performance while matching the OECD's.

Marginal commodity tax reforms: a survey

We summarize the main features and results of the literature on marginal commodity tax reforms as initiated by Ahmad and Stern (1984) and developed further by Yitzhaki and Thirsk (1990). We establish new links with other fields of research, namely the literature on the use of equivalence scales and the one on poverty measurement. We also critically examine some issues associated with the implementation of marginal tax reforms, with special refernce to the estimation of welfare weights and of revenue effects.Commodity, taxation, inequality, poverty

Does more for the poor mean less for the poor? The politics of tagging

Proposals aimed at improving the welfare of the poor often include indicator targeting, in which non-income characteristics (such as race, gender, or land ownership) that are correlated with income are used to target limited funds to groups likely to include a cincentration of the poor. Previous work shows that efficient use of a fixed budget for poverty reduction requires such targeting, either because agents'income cannot be observed or to reduce distortionary incentives arising from redistributive interventions. Inspite of this, the authors question the political viability of targeting. After constructing a model that is basically an extension of Akerlof's 1978 model of"tagging", they derive three main results: 1) Akerlof's result continues to hold: that, ignoring political considerations, not only will targeting be desirable but recipients of the targeted transfer will receive a greater total transfer than they would if targeting were not possible. 2) A classical social-choice analysis-in which agents vote simultaneously about the level of taxation and the degree of targeting-shows that positive levels of targeted transfers will not exist in equilibrium (an unsurprising finding, given Plott's 1968 theorem). It also shows that a voting equilibrium often will exist with no targeting but with non-zero taxation and redistribution. 3) In a game in which the policymaker chooses the degree of targeting while voters choose the level of taxation, the redistributive efficiency gains from tagging may well fail to outweigh the resulting reduction in funds available for redistribution. These results may be extended readily to account for altruistic agents. The authors stress that even when these results hold, the alternative to targeted transfers - a universally received lump-sum grant financed through a proportional tax - will nonetheless be supported politically and will be quite progressive relative to the pretransfer income distribution.Economic Theory&Research,Services&Transfers to Poor,Poverty Impact Evaluation,Environmental Economics&Policies,Poverty Monitoring&Analysis,Services&Transfers to Poor,Rural Poverty Reduction,Environmental Economics&Policies,Poverty Impact Evaluation,Safety Nets and Transfers