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Fiscal Incidence, Mobility and the Poor: a New Approach
Nora LustigTulane University
CGD and IAD
Symposium on Ultra-Poverty Institute for International Economic Policy,
GWUMarch 22-23, 2012
Washington, DC
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Acknowledgements
• Joint work with Satya Chacravarty and Nachiketa Chattopadhyay to develop theoretical properties
• Joint work with Claudiney Pereira and Sean Higgins on fiscal incidence in Brazil
• Part of the Commitment to Equity project/CIPR and Economics Department at Tulane and Inter-American Dialogue
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Standard Measures of Poverty and the Poor
• Standard measures of inequality and poverty are by definition anonymous
• Could standard measures be leaving out important information on how the poor are affected by “events” (e.g., fiscal policy, rising food prices, trade liberalization, growth, etc.)?
=>YES!!!
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Fiscal Policy and the Poor
• Poverty declines• Income distribution becomes less unequal• The incidence of net taxes can be
progressive • However, some of the poor become poorer=>>> Standard Measures Don’t Capture the “Losing Poor”
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New Concept: Fiscal Mobility Matrix
• Directional mobility literature (Fields, 2008) provides a useful framework
• One can identify which individuals are adversely/favorably impacted by a policy or an event
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New Concept: Fiscal Mobility Matrix
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New Concept: Fiscal Mobility Matrix
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New Concept: Fiscal Mobility Matrix
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New Concept: Fiscal Mobility Matrix
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An Illustration: Brazil
• Extreme Poverty (including severity of poverty) declines; Ultra-poverty declines• Inequality declines• First three deciles are net receivers of
transfers• Reynolds-Smolensky indicates taxes
overall are progressive
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POVERTY DECLINES
12PROGRESSIVE
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An Illustration: Brazil
• HOWEVER:
Around 18 (5) percent of the moderate (extreme) poor become extreme (ultra) poor
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An Illustration: Brazil
• This impoverishment of the poor occurs even after all cash transfers to the poor (Bolsa Familia, BPC, etc.) are considered
• What the government giveth with transfers taketh away with indirect taxes for a significant proportion of the poor.
• How much?
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