Assessing the Redistributive Effect of Fiscal Policy

Assessing the Redistributive Effect of Fiscal Policy

Who benefits from public spending? Who bears the burden of taxation? How desirable is the distribution of net benefits from the operation of a tax-benefit system? This paper surveys basic concepts, methods, and modeling approaches commonly used t...

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Bibliographic Details
Main Author:	Essama-Nssah, B.
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ACCOUNTING ACCURATE ESTIMATE ADDITIONAL INCOME ADMINISTRATIVE COST ADMINISTRATIVE COSTS AFTER TAX INCOME AMOUNT OF INCOME AMOUNT OF MONEY ANALYTICAL METHODS APARTHEID BASE YEAR BENCHMARK BENEFICIARIES BUSINESS TAX BUSINESS TAXES CALCULATIONS CAPITAL EXPENDITURE CAPITAL OWNERS CASH TRANSFERS CLAIMANTS COMMODITIES COMMODITY COMMODITY PRICES COMPARATIVE ADVANTAGE COMPARATIVE ANALYSIS COMPETITIVE MARKET CONSUMER CONSUMERS CONSUMPTION EXPENDITURE CONSUMPTION TAXES CORPORATE INCOME TAX CORPORATE INCOME TAXES COST OF FUNDS COST RECOVERY CREDITS CURRENT EXPENDITURE DECISION MAKING DEDUCTIONS DEMOGRAPHIC DERIVATIVE DEVELOPING COUNTRIES DIRECT COSTS DISPOSABLE INCOME DISTRIBUTION OF INCOME DUMMY VARIABLE EARNINGS ECONOMETRIC ANALYSIS ECONOMIC COSTS ECONOMIC MANAGEMENT ECONOMIC TRANSACTIONS ELASTICITY ELASTICITY OF DEMAND ELASTICITY OF SUPPLY EQUILIBRIUM EQUILIBRIUM PRICES EQUITY ISSUES ETHNIC GROUPS EXCISE TAXES FACTORS OF PRODUCTION FISCAL POLICY FLAT TAX GDP GINI COEFFICIENT GOVERNMENT ACTIONS GOVERNMENT BUDGET GOVERNMENT INTERVENTION GOVERNMENT POLICY GOVERNMENT SUBSIDY HEALTH SPENDING HORIZONTAL EQUITY HOUSEHOLD EXPENDITURE HOUSEHOLD INCOME HOUSEHOLD SPENDING HUMAN CAPITAL IMMUNIZATION INCENTIVE EFFECTS INCOME EFFECT INCOME GROUP INCOME GROUPS INCOME INCREASE INCOME INCREASES INCOME LEVEL INCOME LEVELS INCOME SOURCES INCOMES INCOMPLETE MARKETS INFORMATION CONSTRAINTS INSTITUTIONAL CONSTRAINTS INSTRUMENT INTERNATIONAL BANK INTRINSIC VALUE JOB TRAINING LABOR MARKET LEVEL OF EDUCATION LEVEL PLAYING FIELD LITERACY LIVING STANDARD LIVING STANDARDS LORENZ CURVE LOW INCOME LOW INCOMES LOW-INCOME LOW-INCOME INDIVIDUALS LOW-INCOME PEOPLE MARGINAL COST MARGINAL RATE MARGINAL RATES MARGINAL TAX RATE MARGINAL UTILITY MARKET ECONOMY MARKET FAILURE MARKET STRUCTURE MBI MEASUREMENT FRAMEWORK MICRODATA OPPORTUNITY COST OPPORTUNITY SET OUTPUT PAYROLL TAX PERSONAL INCOME PERSONAL INCOME TAX POLITICAL ECONOMY PRICE CHANGE PRICE CHANGES PRICE CONTROLS PRICE ELASTICITY PRIMARY EDUCATION PRIVATE MARKET PROBABILITIES PROBABILITY PRODUCTIVE INVESTMENT PROGRESSIVE TAX PROSPERITY PUBLIC EXPENDITURE PUBLIC EXPENDITURES PUBLIC FINANCE PUBLIC GOOD PUBLIC GOODS PUBLIC POLICIES PUBLIC POLICY PUBLIC SPENDING RATES OF RETURN REAL INCOME REAL INCOME DECLINES REGRESSION ANALYSIS REGRESSIVE SUBSIDY REGRESSIVE TAX RELEVANT POPULATION REMOTE AREAS REMOTE REGIONS RETIRED RETIRED WORKERS RETURNS SALE SALES SAVINGS SECONDARY EDUCATION SHAREHOLDERS SOCIAL ASSISTANCE SOCIAL COST SOCIAL SECURITY SOCIAL SECURITY TAXES SOCIAL SERVICES SOCIAL WELFARE SOCIAL WELFARE PROGRAM STAKEHOLDERS STOCK PRICES SUBSTITUTION EFFECT TAX TAX ADMINISTRATION TAX BASE TAX EVASION TAX INCIDENCE TAX LIABILITIES TAX LIABILITY TAX POLICY TAX PROVISIONS TAX RATE TAX RATES TAX REFORM TAX REVENUE TAX SHIFTING TAX STRUCTURE TAX STRUCTURES TAX SYSTEM TAX TREATMENT TAXABLE INCOME TAXATION TAXPAYERS TOTAL COST TRANSACTION TRANSACTION COSTS TRANSFER PAYMENTS TREASURY UTILITY FUNCTION UTILITY MAXIMIZATION VALUATION VALUE ADDED VALUE ADDED TAXES VALUE JUDGMENTS VERTICAL EQUITY WAGE WAGES WEALTH WEALTH TAXES WELFARE ECONOMICS
Online Access:	http://documents.worldbank.org/curated/en/2008/04/9357308/assessing-redistributive-effect-fiscal-policy http://hdl.handle.net/10986/6725

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Summary:	Who benefits from public spending? Who bears the burden of taxation? How desirable is the distribution of net benefits from the operation of a tax-benefit system? This paper surveys basic concepts, methods, and modeling approaches commonly used to address these issues in the context of fiscal incidence analysis. The review covers the incidence of both taxation and public spending. Methodological points are supported by country cases. The effective distribution of benefits and burdens associated with fiscal policy depends on the size of the government, the distributive mechanisms involved, and the incentives properties of the policy under consideration. This creates a need for analytical methods to account for both individual behavior and social interaction. The approaches reviewed include simple reduced form regression analysis, microsimulation models (both the envelope and discrete choice models), computable general equilibrium modeling, and approaches that link computable general equilibrium models to microsimulation models. Explicit modeling facilitates the construction of counterfactuals to back up causal analysis. Social desirability is assessed on the basis of progressivity along with deadweight loss.

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