Do Poorer Countries Have Less Capacity for Redistribution?

Development aid and policy discussions often assume that poorer countries have less internal capacity for redistribution in favor of their poorest citizens. The assumption is tested using data for 90 developing countries. The capacity for redistrib...

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Bibliographic Details
Main Author:	Ravallion, Martin
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ABSOLUTE VALUE ACCOUNTING AGGREGATE INCOME AGGREGATE POVERTY AID DONORS ALLEVIATION OF POVERTY ANTI-POVERTY ANTI-POVERTY PROGRAM ANTI-POVERTY STRATEGY AVERAGE INCOME CASH TRANSFER CASH TRANSFERS CITIZENS CITIZENSHIP CONSUMER DEMAND CONSUMPTION EXPENDITURE CONSUMPTION PER CAPITA COUNTRY LEVEL COUNTRY PERFORMANCE CREDIT CONSTRAINTS CUMULATIVE DISTRIBUTION CUMULATIVE DISTRIBUTION FUNCTION DATA SET DATA SETS DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPING WORLD DEVELOPMENT POLICY DEVELOPMENT RESEARCH DISTRIBUTIONAL EFFECTS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC INEQUALITY ECONOMIC REVIEW ECONOMICS ECONOMICS LETTERS EMPIRICAL ISSUE EXTREME POVERTY FIGHT AGAINST POVERTY FOREIGN AID FUNCTIONAL FORM GINI INDEX GLOBAL ECONOMY GLOBAL POVERTY GROSS INCOME GROWTH EFFECT GROWTH ELASTICITY GROWTH RATES HETEROSKEDASTICITY HIGH INEQUALITY HIGH INEQUALITY COUNTRIES HIGHER INEQUALITY HUMAN CAPITAL INCOME DISTRIBUTION INCOME GROUPS INCOME INEQUALITY INCOME LEVEL INCOME REDISTRIBUTION INCOME SHARE INCOME TAX INCOME TAXES INEQUALITY MEASURE INEQUALITY WILL INTERNATIONAL BANK LOG GINI LOW INEQUALITY MACROECONOMIC MANAGEMENT MARGINAL TAX MARGINAL TAX RATE MARGINAL TAX RATES MEAN CONSUMPTION MEAN INCOME MEAN INCOMES MEASUREMENT ERRORS MEASUREMENT OF POVERTY MEDIAN POVERTY MEDIAN VOTER MEDIAN VOTER THEOREM MIDDLE CLASS MONETARY FUND NATIONAL ACCOUNTS NATIONAL POVERTY NATIONAL POVERTY LINE NATIONAL POVERTY LINES NATIONAL SURVEYS NEGATIVE CORRELATION NEGATIVE GROWTH POLICY DISCUSSIONS POLICY ISSUES POLICY REFORMS POLICY RESEARCH POLICY RESEARCH WORKING PAPER POLICY REVIEW POOR COUNTIES POOR COUNTRIES POOR COUNTRY POOR REDISTRIBUTION POSITIVE COEFFICIENT POSITIVE GROWTH POSITIVE RELATIONSHIP POVERTY GAP POVERTY GAP INDEX POVERTY LINE POVERTY LINES POVERTY MEASURES POVERTY POLICIES POVERTY PROBLEM POVERTY REDUCTION PRIVATE CONSUMPTION PRO-POOR PROGRESS PUBLIC CHOICE PUBLIC SPENDING PURCHASING POWER PURCHASING POWER PARITY QUALITY GROWTH RATE OF GROWTH REDISTRIBUTIVE POLICIES REDISTRIBUTIVE POLICY REDUCING INEQUALITY REDUCING POVERTY REDUCTION STRATEGY RELATIVE DISTRIBUTION RESPECT RICH COUNTRIES RICH PEOPLE RICHER COUNTRIES SAFETY NETS SOCIAL POLICY STANDARD DEVIATION TAX SYSTEMS UNEQUAL COUNTRIES
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090909133807 http://hdl.handle.net/10986/4238

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Summary:	Development aid and policy discussions often assume that poorer countries have less internal capacity for redistribution in favor of their poorest citizens. The assumption is tested using data for 90 developing countries. The capacity for redistribution is measured by the marginal tax rate on those who are not poor by rich-country standards that is needed to cover the poverty gap or to provide a poverty-level of basic income, judged by developing-country standards. For most (but not all) countries with annual consumption per capita under $2,000 (at 2005 purchasing power parity) the required tax burdens are found to be prohibitive-often calling for marginal tax rates of 100 percent or more. By contrast, the required tax rates are quite low (1 percent on average) among all countries with consumption per capita over $4,000, as well as some poorer countries. Most countries fall into one of two groups: those with little or no realistic prospect of addressing extreme poverty through redistribution from the "rich" and those that would appear to have ample scope for such redistribution. Economic growth tends to move countries from the first group to the second. Thus the appropriate balance between growth and redistribution strategies can be seen to depend on the level economic development.

Do Poorer Countries Have Less Capacity for Redistribution?

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