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  • Author: Nora Lustig
  • Publication Date: 03-2017
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: This paper presents results on the impact of fiscal policy on inequality and poverty in sixteen Latin American countries around 2010. The countries that redistribute the most are Argentina, Brazil, Costa Rica and Uruguay, and the least, Guatemala, Honduras and Peru. At higher social spending, greater redistribution is achieved, but countries with a similar level of social spending show different levels of redistribution which suggests that other factors such as the composition and targeting of the expenditures are involved in determining the redistributive effect beyond its size. Fiscal policy reduces extreme poverty in twelve countries. However, the incidence of poverty after taxes, subsidies and monetary transfers is higher than the pre-fisc poverty rate in Bolivia, Guatemala, Honduras, and Nicaragua, even when fiscal policy does reduce inequality. Expenditure on pre-school and primary education is equalizing and pro-poor in all countries. Spending on secondary education is equalizing in all countries and also pro-poor in some countries but not all. Expenditure on tertiary education is never pro-poor, but it is equalizing, with the exception of Guatemala, where it is regressive and unequalizing and in Venezuela, where its redistributive effect is zero. Health spending is always equalizing but it is pro-poor only in Argentina, Brazil, Chile, Costa Rica, Ecuador, the Dominican Republic, Uruguay and Venezuela.
  • Topic: Civil Society, Poverty, Capitalism, Income Inequality
  • Political Geography: Latin America
  • Author: Nora Lustig, Margarita Beneke, José Andrés Oliva
  • Publication Date: 01-2017
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: We conducted a fiscal impact study to estimate the effect of taxes, social spending, and subsidies on inequality and poverty in El Salvador, using the methodology of the Commitment to Equity project. Taxes are progressive, but given their volume, their impact is limited. Direct transfers are concentrated on poor households, but their budget is small so their effect is limited; a significant portion of the subsidies goes to households in the upper income deciles, so although their budget is greater, their impact is low. The component that has the greatest effect on inequality is spending on education and health. Therefore, the impact of fiscal policy is limited and low when compared with other countries with a similar level of per capita income. There is room for improvement using current resources.
  • Topic: International Trade and Finance, Poverty, Income Inequality
  • Political Geography: El Salvador
  • Author: Peter Edward, Andy Sumner
  • Publication Date: 05-2015
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: This paper makes new estimates of global poverty and inequality in 2012 using both ‘old’, 2005 and ‘new’, 2011 purchasing power parity (PPP) price data in order to assess systematically what difference PPP data makes to the estimates. The methodology for the 2011 PPP data is thought to be superior. However, contentions remain. We discuss the PPPs and justify the use of 2011 PPP data to estimate global poverty and inequality, at least for comparison purposes.
  • Topic: Poverty
  • Author: Peter Edward, Andy Sumner
  • Publication Date: 09-2015
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: This paper considers the effectiveness and efficiency of global growth, as a route to poverty reduction, since 1990 and then demonstrates the redistributive challenges implicit in various poverty lines and scenarios: the significance being that this historical data can inform understanding and appreciation of what it would involve to end global poverty in the future. We find that a very modest redistribution of global growth could have ended poverty already at the lowest poverty lines. However, higher, but arguably more reasonable, poverty lines present radically different challenges to the current workings of national economic systems and to global (normative) obligations.
  • Topic: Development, Economics, Humanitarian Aid, Poverty
  • Author: Nora Lustig
  • Publication Date: 08-2015
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: This paper examines the redistributive impact of fiscal policy for Brazil, Chile, Colombia, Indonesia, Mexico, Peru and South Africa using comparable fiscal incidence analysis with data from around 2010. The largest redistributive effect is in South Africa and the smallest in Indonesia. While fiscal policy always reduces inequality, this is not the case with poverty.
  • Topic: Economics, Poverty, Social Stratification
  • Political Geography: Africa, South America, Latin America
  • Author: Nancy Birdsall, Christian J. Meyer
  • Publication Date: 01-2014
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: We argue that survey-based median household consumption expenditure (or income) per capita be incorporated into standard development indicators, as a simple, robust, and durable indicator of typical individual material well-being in a country. Using household survey data available for low- and middle-income countries from the World Bank's PovcalNet tool, we show that as a measure of income-related well-being, it is far superior to the commonly used GDP per capita as well as survey-based measures at the mean. We also argue that survey-based median measures are "distributionaware", i.e. when used as the denominator of various widely available indicators such as mean consumption expenditure per capita they provide a "good-enough" indicator of consumption (or income) inequality. Finally, as a post-2015 indicator of progress at the country-level in promoting shared development and reducing inequality, we propose that the rate of increase in median consumption per capita after taxes and transfers exceed the rate of increase in average consumption in the same period.
  • Topic: Development, Diplomacy, Poverty, World Bank
  • Political Geography: United Nations
  • Author: Oeindrila Dube, Omar Garcia-Ponce, Kevin Thom
  • Publication Date: 02-2014
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: We examine how commodity price shocks experienced by rural producers affect the drug trade in Mexico. Our analysis exploits exogenous movements in the Mexican maize price stemming from weather conditions in U.S. maize-growing regions, as well as export flows of other major maize producers. Using data on over 2,200 municipios spanning 1990-2010, we show that lower prices differentially increased the cultivation of both marijuana and opium poppies in municipios more climatically suited to growing maize. This increase was accompanied by differentially lower rural wages, suggesting that households planted more drug crops in response to the decreased income generating potential of maize farming.
  • Topic: Agriculture, Economics, Poverty, War on Drugs, Narcotics Trafficking
  • Political Geography: Latin America, Mexico
  • Author: Michael Clemens, Timothy N. Ogden
  • Publication Date: 02-2014
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: It is time to fundamentally reframe the research agenda on remittances, payments, and development. We describe many of the research questions that now dominate the literature and why they lead us to uninformative answers. We propose reasons why these questions dominate, the most important of which is that researchers tend to view remittances as states do (as windfall income) rather than as families do (as returns on investment). Migration is, among other things, a strategy for financial management in poor households: location is an asset, migration an investment. This shift of perspective leads to much more fruitful research questions that have been relatively neglected. We suggest 12 such questions.
  • Topic: Economics, Migration, Political Economy, Poverty, Labor Issues, Immigration
  • Author: Liliana Rojas-Suarez, Maria Alejandra Amado
  • Publication Date: 05-2014
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: This paper analyzes Latin America's Financial Inclusion Gap, the difference between the average financial inclusion for Latin America and the corresponding average for a set of comparator countries. At the country level, we assess four types of obstacles to financial inclusion: macroeconomic weaknesses, income inequality, institutional deficiencies and financial sector inefficiencies. A key finding of this paper is that although the four types of obstacles explain the absolute level of financial inclusion, institutional deficiencies and income inequality are the most important obstacles behind the Latin America's financial inclusion gap. From our analysis at the individual level, we find that there is a Latin America-specific effect of education and income. The results suggest that the effect of attaining secondary education on the probability of being financially included is significantly higher in Latin America than in its comparators. Furthermore, the difference in the probability of being financially included between the richest and the poorest individuals is significantly higher in Latin America than in comparator countries.
  • Topic: Economics, Education, Human Rights, Poverty
  • Political Geography: Latin America
  • Author: Alex Cobham, Andy Sumner
  • Publication Date: 09-2013
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: There are normative or instrumental reasons why inequality may be said to matter (e.g. fairness and meritocracy). However, much global literature has taken an instrumentalist approach as to why high or rising inequality can hinder development. For example, Birdsall (2007) argues that income inequality in developing countries matters for at least three instrumental reasons: where markets are underdeveloped, inequality inhibits growth through economic mechanisms; where institutions of government are weak, inequality exacerbates the problem of creating and maintaining accountable government, increasing the probability of economic and social policies that inhibit growth and poverty reduction; and where social institutions are fragile, inequality further discourages the civic and social life that underpins the effective collective decision-making that is necessary to the functioning of healthy societies.
  • Topic: Economics, Poverty, Social Stratification, Labor Issues