Fiscal Policy and Income Inequality. March 13, 2014

Transcription

1 Fiscal Policy and Income Inequality March 13, 2014

2 Inequality has been increasing in most economies 0.55 Disposable Income Inequality: Gini coefficient Latin America and Caribbean (19) Advanced (21) Asia and Pacific (14) Emerging Europe (21) Middle East and North Africa (12) Sub-Saharan Africa (22) 2

3 More recently, the focus has been on the rising income share of top income earners Gross Income Share of Top One-Percent in Selected Advanced and Developing Economies, Percent United Kingdom Australia Canada South Africa India United States France Germany Japan Netherlands Sweden 3

4 Wealth is even more unequally distributed JPN CHN ESP KOR ITA AUS NLD TWN BGD GER IND VNM CAN GBR PAK RUS THA TUR FRA NGA ARG MEX IDN BRA USA CHE 4

5 Redistributive fiscal policy reduces inequality by one-third in advanced economies, especially through spending From taxes From transfers Average market income Gini: 0.43 Average disposable income Gini: DNK CZE BEL SVN NOR GBR FIN AUT SWE LUX DEU FRA AUS IRL NLD ISR CAN USA EST ITA GRC ESP KOR TWN Absolute Gini reduction 5

6 In-kind spending further reduces inequality in advanced economies 0.08 Redistributive Impact of In-kind Spending Average Gini Reduction: Reduction in Gini coefficient UK Italy Germany Greece Belgium Health Benefits Education Benefits Rent Subsidy 6

7 The level and composition of fiscal policy reduces its redistributive impact in developing economies 35 Levels and Composition of Tax Revenues (in percent of GDP, 2011) Levels and Composition of Social Spending (in percent of GDP, 2011) Advanced (25) Emerging Latin Asia and Europe (19) America (15) Pacific (10) Sub- Middle East Saharan and North Africa Africa (16) (7) Advanced (30) Emerging Latin Europe America (17) (16) Middle East and North Africa (9) Asia and Sub-Saharan Pacific Africa (17) (15) Indirect Income Corporate Property Social Protection Health Education 7

8 Furthermore, a large share of the benefits from spending often goes to higherincome groups Social Protection Coverage and Benefit Share of Poorest 40 Percent Median = 56.3 Benefit Incidence (Percent) Median = Coverage (Percent) Social protection includes pensions and social assistance transfers. 8

9 In-kind social spending is also regressive in many developing economies In-kind Social Spending Benefit Share of Poorest 40 Percent 80 Education 80 Health percent percent NAM 2003 LSO 2002 ZAF 2000 ARG 2009 BRA 2009 PER 2009 MEX 2008 ALB 2002 BIH 2001 KEN 2006 CRI 2001 KHM 2002 TUR 2001 AZE 2001 LBR 2008 KSV 2000 THA 2008 NPL 2004 BOL 2007 UZB 2000 CIV 2008 BEN 2003 MOZ 2003 EGY 2005 UGA 2006 BGD 2000 ZMB 2009 ARG 2009 ZAF 2000 BRA 2009 BOL 2007 EGY 2005 BLR 2002 HND 2004 MEX 2008 MNG 1995 BGD 2000 ZMB 2009 TUR 2003 MOZ 1997 BGR 1995 THA 2008 ROM 1997 GHA 1998 IND 1996 ECU 1998 GTM

10 Designing efficient redistributive fiscal policy Redistributive fiscal policy should be consistent with macroeconomic objectives The impact of tax and spending policies should be evaluated jointly Tax and expenditure policies need to be carefully designed to balance distributional and efficiency objectives Design should take into account administrative capacity 10

11 Reform options to achieve more efficient redistribution of taxation Direct taxes Implement progressive personal income tax (PIT) rate structures Expand coverage of PIT Utilize better the opportunities for recurrent property taxes Advanced Developing Indirect taxes Minimize VAT exemptions and special VAT rates 11

12 Reform options to achieve more efficient redistribution of social spending Education Improve access to education of lowincome families Advanced Developing Health Expand coverage of publicly financed basic health package Maintain access of low-income groups to essential health services 12

13 Reform options to achieve more efficient redistribution of social spending Social transfers Intensify the use of active labor market programs and in-work benefits Expand conditional cash transfer (CCT) programs as administrative capacity improves Increase effective pension retirement age Expand noncontributory means-tested social pensions Advanced Developing 13

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