INEQUALITY AND FISCAL REDISTRIBUTION IN
MIDDLE INCOME COUNTRIES
Brazil, Chile, Colombia, Indonesia, Mexico,
Peru and South Africa
Nora Lustig
Desafios do Desenvolvimento Brasileiro
Seminário em homenagem a Albert Fishlow
IEPE/CdG
Rio de Janeiro, Brasil
3 de julho de 2015
What is CEQ: Description of Project
 The CEQ project is an initiative of:
• The Center for Inter-American Policy and Research
(CIPR) and the Department of Economics, Tulane
University, the Inter-American Dialogue and the
Center for Global Development
 CEQ’s goals are to:
• Foster evidence-based policy discussion
• Assist governments, multilateral institutions, and
nongovernmental organizations in their efforts to
build more equitable societies
2
What is CEQ: the CEQ Assessment
The CEQ project developed the CEQ Assessment, a
diagnostic instrument
• Comprehensive framework to analyze the effect of
taxation and public spending on inequality and poverty
• Method: Fiscal Incidence analysis and qualitative
diagnostic approach
• Application of a common methodology across countries
makes cross-country comparisons more accurate
• Methodology is designed to be as comprehensive as
possible without sacrificing detail in any particular
component of the analysis
3
www.commitmentoequity.org
4
Paper based on following CEQ studies:
•
•
•
•
•
•
•
Brazil: Higgins, Sean and Claudiney Pereira. 2014. “The Effects of Brazil’s Taxation and
Social Spending on the Distribution of Household Income.” In Lustig, Nora, Carola
Pessino and John Scott. 2014. Editors. The Redistributive Impact of Taxes and Social
Spending in Latin America. Special Issue. Public Finance Review, May, Volume 42, Issue
3 and CEQ Master Workbook: Brazil, November 4.
Chile: Ruiz-Tagle, Jaime and Dante Contreras. 2014. CEQ Master Workbook: Chile,
August.
Colombia: Melendez, Marcela. 2014. CEQ Master Workbook: Colombia, November 21,
Tulane University.
Indonesia:Afkar, R., J. Jellema, and M. Wai-Poi, "Fiscal Policy, Redistribution, and
Inequality in Indonesia," in G. Inchauste and N. Lustig (eds), The Distributional Impact of
Fiscal Policy: Experience from Developing Countries, forthcoming.
Mexico: Scott, John. 2014. “Redistributive Impact and Efficiency of Mexico’s Fiscal
System.” In Lustig, Nora, Carola Pessino and John Scott. 2014. Editors. The Redistributive
Impact of Taxes and Social Spending in Latin America. Special Issue. Public Finance
Review, May, Volume 42, Issue 3.
Peru: Jaramillo, Miguel. 2014. “The Incidence of Social Spending and Taxes in Peru.” In
Lustig, Nora, Carola Pessino and John Scott. 2014. Editors. The Redistributive Impact of
Taxes and Social Spending in Latin America. Special Issue. Public Finance Review, May,
Volume 42, Issue 3 and CEQ Master Workbook: Peru, June 21, 2013.
South Africa: Inchauste, Gabriela, Nora Lustig, Mashekwa Maboshe, Catriona Purfield
and Ingrid Wollard. 2015. The Distributional Impact of Fiscal Policy in South Africa.
Policy Research Working Paper 7194, The World Bank, February.
5
6
Figure 1: Size and composition of government budgets (circa 2010)
Panel a: Composition of Social Spending as a Share of GDP
(ranked by social spending/GDP)
30.0%
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
25.0%
20.0%
15.0%
10.0%
Direct Transfers
Education
Health
Contributory Pensions
Other Social Spending
OECD
Seven
Countries
Brazil(2009)
South
Africa***(2010)
Mexico(2010)
Colombia(2010)
Peru(2009)
Indonesia*(2012)
0.0%
Chile**(2009)
5.0%
GNI per capita (2011 PPP)
7
Panel b: Composition of Total Government Revenues as a Share of GDP
(ranked by total government revenue/GDP)
60.00%
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
50.00%
40.00%
30.00%
20.00%
Direct Taxes
Indirect and Other Taxes
Other Revenues
GNI per capita (2011 PPP)
Brazil(2009)
South
Africa***(2010)
Peru(2009)
Mexico(2010)
Chile**(2009)
Indonesia*(2012)
0.00%
Colombia(2010)
10.00%
Social Security Contributions
8
Figure 2: Fiscal Policy and Inequality (circa 2010)
(Gini Coefficient for Market, Disposable, Post-fiscal and Final Income)
Panel a: Pensions in Market Income
0.8000
0.7500
0.7000
0.6500
0.6000
0.5500
0.5000
0.4500
0.4000
0.3500
0.3000
Brazil
(2009)
Chile*
(2009)
Market Income
Colombia
(2010)
Indonesia**
(2012)
Disposable Income
Mexico
(2010)
Post-fiscal Income
Peru
(2009)
SA**
(2010)
Final Income
9
Panel b: Pensions as Transfers
0.6500
0.6000
0.5500
0.5000
0.4500
0.4000
0.3500
0.3000
Brazil
(2009)
Chile*
(2009)
Market Income
Colombia
(2010)
Disposable Income
Indonesia**
(2012)
Post-fiscal Income
Mexico
(2010)
Peru
(2009)
Final Income
10
Table 1: Gini Coefficient for Pre-pension and Post-pension Market Income (circa
2010)
Brazil
(2009)
Chile Colombia Indonesia Mexico
(2009) (2010) (2012) (2008)
9.06%
3.87%
3.14%
0.76%
2.60%
South
Peru
c
Africa
(2009)
(2010)
0.90% 0.97%
Gini Market Income w/o Pensions 0.5999
0.5635
0.5781
0.3944
0.5087
0.5025
Gini Market Income w/Pensions
0.5788
0.5637
0.5742
0.3942
0.5107
0.5039 0.7712
Change in %
Change in ppts
3.6% -0.04%
0.0211 -0.0002
0.7%
0.0039
0.1%
0.0002
-0.4% -0.3%
-0.0019 -0.0014
Pension as % GDP
a
b
--
--11
A. Redistribution and market income inequality
0.2000
0.1800
ZAF
0.1600
Redistribuive Effect
0.1400
BRA
CHL
0.1200
0.1000
MEX
0.0800
0.0600
0.0400
0.0200
PER
COL
IDN
0.0000
0.3800 0.4300 0.4800 0.5300 0.5800 0.6300 0.6800 0.7300 0.7800 0.8300
Gini Market Income
12
B. Final income inequality and market income
inequality
0.60
ZAF
0.55
Gini Final Income
COL
0.50
PER
0.45
BRA
MEX
CHL
0.40
IDN
0.35
0.38
0.43
0.48
0.53
0.58
0.63
0.68
0.73
0.78
0.83
Gini Market Income
13
Figure 4. Redistribution and social spending, 2010
0.2000
0.1800
ZAF
Restributive Effect
0.1600
0.1400
BRA
0.1200
CHL
0.1000
MEX
0.0800
0.0600
COL
0.0400
IDN
0.0200
0.0000
0.0%
5.0%
PER
10.0%
15.0%
20.0%
25.0%
30.0%
Social Spending
14
0.8000
0.2000
0.7000
0.6000
0.1500
0.5000
0.4000
0.1000
0.3000
Market Income Gini
Redistributive Effect: Market to Disposable
Redistributive Effect: Brazil, Chile, Colombia, Indonesia, Mexico, Peru, South Africa,
EU and the United States
(Change in Gini Points: Market to Disposable Income; circa 2010)
0.2000
0.0500
0.1000
0.0000
0.0000
Pension as Market Income
Pension as Transfer
Market Income Gini, Pensions Mkt Inc
Market Income Gini, Pensions as Transf
15
Marginal Contribution of Taxes and Transfers (circa 2010)
(Pensions as Market Income)
Panel a. Redistributive Effect from Market to Disposable
0.0900
0.0788
0.0800
0.0700
0.0600
0.0500
0.0453
0.0400
0.0340
0.0300
0.0236
0.0200
0.0075
0.0100
0.0099
0.0044
0.0000
Brazil
Chile*
Colombia
Direct taxes
Indonesia**
Direct transfers
Mexico
Peru
SA***
Redistributive Effect
16
Panel b. Redistributive Effect from Market to Post-Fiscal
0.0900
0.0789
0.0800
0.0700
0.0600
0.0500
0.0446
0.0370
0.0400
0.0308
0.0300
0.0151
0.0200
0.0073
0.0061
Colombia
Indonesia**
0.0100
0.0000
Brazil
Chile*
Mexico
Peru
SA***
-0.0100
Direct taxes
Direct transfers
Indirect taxes
Indirect subsidies
Redistributive Effect
17
Fiscal Policy and Poverty Reduction (circa 2010)
(Change in Headcount Ratio from Market to Post-fiscal Income for Pensions in Market
Income and Pensions in Transfers; in %) a
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
-25.0%
-30.0%
-35.0%
Brazil (2009)
Colombia
(2010)
Indonesia*
(2012)
Peru (2009) Mexico (2010) South Africa**
(2010)
Pensions as Market Income
Chile***
(2009)
Pensions as Transfer
18
Net Payers to the Fiscal System (circa 2010)
Panel a: Pensions as Market Income
Net Receivers
Net Payers
Indonesia*(2012)
Chile**(2009)
Colombia(2010)
Mexico(2010)
Peru(2009)
South
Africa***(2010)
Brazil(2009)
y<1.25
1.25<=y<2.5
2.5<=y<4
4<=y<10
10<=y<50
y>=50
19
Progressivity and Pro-poorness of Education and Health Spending. Summary of
Results
Educ&Total
Pre$school
Primary
Secondary
Pro$poor&CC&is& Same&per& Progressive&CC&Pro$poor&CC&is& Same&per&
negative capita&for&al ;& positive&but& negative capita&for&all;&
CC&=0
lower&than&
CC&=0
market&
income&Gini
Progressive&CC&Pro$poor&CC&is& Same&per&
positive&but& negative capita&for&all;&
lower&than&
CC&=0
market&
income&Gini
Progressive&CC&Pro$poor&CC&is& Same&per&
positive&but& negative capita&for&all;&
lower&than&
CC&=0
market&
income&Gini
Brazil&(2009)
+
+
+
&Chile&(2009)
+
+
+
Colombia&(2010)
+
+
+
Indonesia&(2012)
+
na
+
Mexico&(2010)
+
+
+
Peru&(2009)
+
+
+
South&Africa&(2010)
+
+
+
*CC&is&almost&equal&to&market&income&Gini&coefficient
If&the&Concentration&Coefficient&is&higher&or&equal&to&$0.5&but&not&higher&than&0.5,&it&was&considered&equal&to&0.
+
+
+
Tertiary
Progressive&CC& Pro$poor&CC&is& Same&per&
positive&but& negative capita&for&all;&
lower&than&
CC&=0
market&
income&Gini
Health
Progressive&CC&Regressive&CC& Pro$poor&CC&is& Same&per&
positive&but& positive&AND& negative capita&for&all;&
lower&than& higher&than&
CC&=0
market& market&
income&Gini income&Gini
+
+
+
+
+
+
+
+
+
+
+
+
+
+
Progressive&CC&
positive&but&
lower&than&
market&
income&Gini
+
+
+
+
20
Obrigada