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Fiscal Incidence, Mobility and the Poor: a New Approach Nora Lustig Tulane University CGD and IAD

Fiscal Incidence, Mobility and the Poor: a New Approach Nora Lustig Tulane University CGD and IAD. Symposium on Ultra-Poverty Institute for International Economic Policy, GWU March 22-23, 2012 Washington, DC. Acknowledgements.

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Fiscal Incidence, Mobility and the Poor: a New Approach Nora Lustig Tulane University CGD and IAD

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  1. Fiscal Incidence, Mobility and the Poor: a New ApproachNora LustigTulane UniversityCGD and IAD Symposium on Ultra-Poverty Institute for International Economic Policy, GWU March 22-23, 2012 Washington, DC

  2. Acknowledgements • Joint work with SatyaChacravarty and NachiketaChattopadhyay 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

  3. 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!!!

  4. 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”

  5. 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

  6. New Concept: Fiscal Mobility Matrix

  7. New Concept: Fiscal Mobility Matrix

  8. New Concept: Fiscal Mobility Matrix

  9. New Concept: Fiscal Mobility Matrix

  10. 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

  11. POVERTY DECLINES

  12. PROGRESSIVE

  13. An Illustration: Brazil • HOWEVER: Around 18 (5) percent of the moderate (extreme) poor become extreme (ultra) poor

  14. An Illustration: Brazil • This impoverishment of the poor occurs even after all cash transfers to the poor (BolsaFamilia, 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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