Commitment to Equity Assessment (CEQ) A Diagnostic Framework to Assess Governments' Fiscal Policies Handbook

Fiscal policy can change poverty and inequality substantially or little depending on the government's redistributive effort. We develop a diagnostic framework to assess how aligned fiscal policies are with supporting a minimum living standard and human capital accumulation, as well as reducing inequality. The Commitment to Equity Assessment (CEQ) evaluates efforts based on whether governments: i. collect and allocate enough resources to support a minimum living standard for all; ii. collect and distribute resources equitably; iii. ensure spending is fiscally sustainable and that programs are of good quality and incentive compatible; iv. collect and publish relevant information as well as are subject to independent evaluations. The CEQ relies on inequality, poverty and tax and benefit incidence analyses.poverty, inequality, fiscal incidence, social policy, Latin America

Fiscal policy and income redistribution in Latin America: Challenging the conventional wisdom

Conventional wisdom states that fiscal policy redistributes little in Latin America. Lower tax revenues and – above all – lower and less progressive transfers have been identified as the main cause. Existing studies show that, while in Europe the distribution of all transfers combined (cash and in-kind) is egalitarian, the bulk of transfers in Latin America accrue to the upper quintile. Through an in-depth fiscal incidence analysis applied to Argentina, Bolivia, Brazil, Mexico and Peru we argue that conventional wisdom may be wrong. First, the extent and effectiveness of income redistribution and poverty reduction, revenue-collection, and spending patterns vary so significantly across countries that speaking of ?Latin America? as a unity is misleading. The (after direct taxes and transfers) Gini, for example, declines by over 10 percent in Argentina but by only 2.4 percent in Bolivia. In Argentina, Brazil and Bolivia government revenues are close to 40 percent of GDP, whereas in Mexico and Peru they are around 20 percent. Social spending (excluding contributory pensions) as a share of GDP ranges from 17 percent in Brazil to 5.2 percent in Peru. Second, social spending does not accrue to the richest quintile. On the contrary, concentration coefficients for social spending are highly negative (progressive in absolute terms) for Argentina and slightly so for Bolivia and Mexico. In Brazil and Peru social spending is progressive in relative terms only. Third, there is no obvious correlation between the size of government and the size of social spending, on the one hand, and the extent and effectiveness of redistribution, on the other: government size is similar for Argentina and Bolivia but they are on opposite sides in terms of the extent of redistribution. Fourth, due to indirect taxes households are net payers to the ?fisc? beginning in the third decile in Bolivia and Brazil; for Argentina, Mexico and Peru this happens in the fifth decile. Fifth, corrective measures differ too: in Argentina, Bolivia and Brazil they may involve the reduction in revenues and total spending, while revenues and social spending (especially direct transfers to the poor) should be increased in Mexico and Peru. Bolivia and Brazil need to introduce changes to their tax and transfer system so that net payers to the ?fisc? start at higher incomes. All five countries need to improve the progressivity of their spending, including non-social spending components.fiscal incidence, fiscal policy, inequality, poverty, redistribution, social policy, taxes, transfers; Latin America, Argentina, Bolivia, Brazil, Mexico and Peru

Multidimensional indices of achievements and poverty: What do we gain and what do we lose?

Poverty and wellbeing are multi-dimensional. Nobody questions that deprivations and achievements go beyond income. There is, however, sharp disagreement on whether the various dimensions of poverty and wellbeing can be aggregated into a single, multi-dimensional index in a meaningful way. Is aggregating dimensions of poverty and wellbeing useful? Is it sensible? Here I summarize and contrast three key papers that respond these questions in strikingly different ways. The papers are: The HDI 2010: New Controversies, Old Critiques by Jeni Klugman, Francisco Rodríguez and Hyung-Jin Choi; Understandings and Misunderstandings of Multidimensional Poverty Measurement by Sabina Alkire and James Foster; and, On Multidimensional Indices of Poverty by Martin Ravallion.poverty measurement, multidimensional poverty, deprivation, axioms, Human Development Index, capabilities, substitutability, trade-offs, welfare, country classifications

Commitment to Equity Assessment (CEQ). A diagnostic framework to assess governments’ fiscal policies. Handbook

Fiscal policy can change poverty and inequality substantially or slightly depending on the government’s redistributive effort. We develop a diagnostic framework to assess how aligned fiscal policies are with supporting a minimum living standard and human capital accumulation, as well as with reducing inequality. The Commitment to Equity Assessment (CEQ) evaluates efforts based on whether governments: i. collect and allocate enough resources to support a minimum living standard for all; ii. collect and distribute resources equitably; iii. ensure that spending is fiscally sustainable and that programs are of good quality and incentive compatible; iv. collect and publish relevant information, as well as are subject to independent evaluations. CEQ relies on inequality, poverty and tax and benefit incidence analyses.poverty, inequality, fiscal incidence, social policy, Latin America.

The Knowledge Bank and Poverty Reduction

The World Bank's (WB) mission and overarching goal is to reduce poverty. Moving ahead, what can the WB do to enhance its contribution to the poverty reduction agenda? This question can be answered from at least two perspectives: the WB as a lending institution and the WB as a knowledge bank. This article will concentrate on the latter and suggest two areas in which more and better information and analysis could help move the poverty reduction agenda forward: improving data on poverty and redressing poverty assessments to include the impact of fiscal policy on poverty and inequality.poverty data, errors, gaps, inconsistencies

Scholars Who Became Practitioners: the Influence of Research on the Design, Evaluation and Political Survival of Mexico's Anti-poverty Program Progresa/Oportunidades

Celebrated by academics, multilateral organizations, policy-makers and the media, Mexico's Progresa/Oportunidades conditional cash transfers program (CCT) is constantly used as a model of a successful anti-poverty program. Here I argue that the transformation of well-trained scholars into influential practitioners played a fundamental role in promoting a new conceptual approach to poverty reduction, ensuring the technical soundness and effectiveness of the program, incorporating rigorous impact evaluation, and persuading politicians to implement and keep the program in place. The involvement of scholars-practitioners also helped disseminate the new CCT "technology" to many countries around the world within a decade.anti-poverty programs, conditional cash transfers, scholars, practitioners, Progresa, Oportunidades, Mexico

Investing in Health for Economic Development: The Case of Mexico

health, healthcare, poverty, determinants of economic growth, MDGs

Coping with Rising Food Prices: Policy Dilemmas in the Developing World

This paper examines the policy dilemmas and challenges faced by developing country governments when confronted with rising food prices, especially when it comes to the prices of basic foods such as rice and corn. One option for governments is to let domestic prices adjust to reflect the full change in international prices. However, this generates inflationary pressures, and if poor households lack savings or access to credit and social safety nets are inadequate, high food prices can cause severe hardship.Countries with large international reserves could mitigate these effects by appreciating their currency. But an exchange rate appreciation hurts the tradable sector and may cause macroeconomic imbalances down the road. Alternatively, governments can use food subsidies or export restrictions to stabilize domestic prices, shifting the burden of adjustment back on to international markets. The former measures exacerbate global food price fluctuations, hence are a “beggar-thy-neighbor” policy response which undermines a rules-based trading system and reduces welfare particularly in food importing countries. Without a multilateral solution to food price volatility in international markets, however, it is not surprising that developing countries pursue what is perceived as best for them even if the rest of the world is made worse off. With the introduction of biofuels, food commodity prices are likely to behave more like industrial commodity prices, so episodes of rapidly rising food commodity prices are bound to happen more frequently in the future. Biofuels not only lead to a rise in the long-term price of food staples but will also make food prices much more sensitive to the business-cycle much more than in the past. “Beggar-thy- neighbor” policies will become a common practice every time nonrenewable energy prices go up.Food Prices, Inflation, Poverty, Policy Dilemmas, Safety Nets

Multidimensional Indices of Achievements and Poverty: What Do We Gain and What Do We

Poverty and wellbeing are multi-dimensional. Nobody questions that deprivations and achievements go beyond income. There is, however, sharp disagreement on whether the various dimensions of poverty and wellbeing can be aggregated into a single, multi-dimensional index in a meaningful way. Is aggregating dimensions of poverty and wellbeing useful? Is it sensible? Here I summarize and contrast three key papers that respond these questions in strikingly different ways. The papers are: The HDI 2010: New Controversies, Old Critiques by Jeni Klugman, Francisco Rodríguez and Hyung-Jin Choi; Understandings and Misunderstandings of Multidimensional Poverty Measurement by Sabina Alkire and James Foster; and, On Multidimensional Indices of Poverty by Martin Ravallion.poverty measurement, multidimensional poverty, deprivation, axioms, Human Development Index, capabilities, substitutability, trade-offs, welfare, country classifications

Thought for Food: The Challenges of Coping with Soaring Food Prices

World food commodities prices increased 130 percent from January 2002 to July 2008. Individual agricultural commodities show even more pronounced increases: corn, wheat, rice and soybeans rose by 190, 162, 318 and 246 percent, respectively. Since July, food commodities prices began to fall. While this decline comes as a relief, prices are likely to stay high in the foreseeable future. Available evidence suggests that the decline in living standards of net consumers caused by higher food prices outweighs the benefits accruing to poor net sellers in the majority of countries that have been analyzed so far. The time to implement measures to help the poor net consumers cope with higher food prices is now. However, too many developing countries lack the instruments, administrative capacity and fiscal space to implement safety nets fast enough and in the required scale. This is one of the most pressing policy challenges that we face. For the poor who are net sellers, governments should seize the opportunity to convert the short-run windfall into longer-term gains. Multilateral financial institutions can play a key role in providing financial resources to countries facing negative terms of trade shocks, technical assistance in the design of safety nets and resources to add fiscal space to countries to fund safety net programs. International organizations can also help countries design the appropriate macroeconomic policy response. This will call for greater flexibility in the menu of policy options traditionally deployed by the Bretton Woods institutions.Food Prices, Poverty, Inflation, Multilateral Financial Institutions