Title Commitment to Equity Handbook
Subtitle Estimating the Impact of Fiscal Policy on Inequality and Poverty
Author Nora Lustig
ISBN 9780815732204
List price USD 49.99
Price outside India Available on Request
Original price
Binding Paperback
No of pages 900
Book size 178 x 254 mm
Publishing year 2018
Original publisher Brookings Institution Press
Published in India by .
Exclusive distributors Viva Books Private Limited
Sales territory India, Sri Lanka, Bangladesh, Pakistan, Nepal, .
Status New Arrival
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Description:

A how-to guide for assessing the impact of fiscal policy on inequality and poverty

Inequality has emerged in recent years as a major topic of economic and political discussion, but it is often unclear whether governments can or should do something about it, and if so, what that something might be. This unique volume, edited by Nora Lustig, an equity expert at Tulane University, helps fill that void. Developed by the Commitment to Equity Institute at Tulane, the book examines both the theory and the practical methods for determining the impact of taxation and public spending on inequality and poverty. It provides a step-by-step guide for policymakers, economists, and social planners when analyzing whether fiscal policy has narrowed or widened inequality. The book also has user-written software for conducting a Commitment to Equity Assessment, along with several country studies of these assessments.

In addition to serving as a manual, the book can be used as a stand-alone reference for those interested in the methods for assessing the impact on equity of fiscal policy. It also serves as a textbook for advanced undergraduate and graduate courses on public finance and income distribution.


Contents:

List of Illustrations

Foreword François Bourguignon

Acknowledgments CEQ Handbook

Acknowledgments to the 2013 Edition

Abstracts

Introduction
Nora Lustig

1 About This Handbook

2 Why Fiscal Incidence Analysis?

3 The Commitment to Equity Assessment

4 Main Messages

5 Organization of the Handbook

6 How to Use This Handbook

7 CEQ Assessments: Data Requirements

8 About the CEQ Institute

PART I: Methodology

Chapter 1: The CEQ Assessment: Measuring the Impact of Fiscal Policy on Inequality and Poverty
Nora Lustig and Sean Higgins

The Theory of Fiscal Redistribution: Key Analytical Insights • The Fundamental Equation of the Redistributive Effect Lambert’s Conundrum • The Wildcard: Reranking of Households • Fiscal Incidence Analysis at a Glance • Allocating Taxes and Transfers to Individuals: The Art of Fiscal • Incidence Analysis • Old-Age Social Insurance Contributory Pensions: A Government Transfer or Deferred Income? • Policy Simulations • Caveats: No Behavioral Responses, No Intertemporal Effects, and No Spillover Effects • CEQ Assessment: Indicators • Impact and Spending Effectiveness Indicators • Impact Effectiveness (IE) • Spending Effectiveness (SE) • Transfers: Indicators of Coverage, Errors of Exclusion, Errors of Inclusion, and Errors of Social Programs: Definitions

Chapter 2: Analytic Foundations: Measuring the Redistributive Impact of Taxes and Transfers
Ali Enami, Nora Lustig, and Rodrigo Aranda

The Fiscal System and Income Redistribution: The Case of a Single Tax or a Single Transfer • A Single Tax • Equalizing, Neutral, and Unequalizing Net Fiscal Systems: Conditions for the One-Tax Case • Comparing Two Taxes of Dif­ferent Sizes • A Single Transfer • Fiscal Systems: Comparing Two Single-Transfer Systems of Different Sizes • The Fiscal System and Income Redistribution: Multiple Taxes and Transfers • Equalizing, Neutral, and Unequalizing Net Fiscal Systems • Conditions for the One Tax–One Transfer Case • Conditions for the Multiple Taxes and Transfers Case • Equalizing, Neutral, and Unequalizing Taxes or Transfers • Conditions for the One Tax–One Transfer Case • Conditions for the Multiple Taxes and Transfers Case • The Derivative of Marginal Contribution with Respect to Progressivity and Size • The Derivatives for the Case of a Marginal Change in Taxes • The Derivatives for the Case of a Marginal Change in Transfers • The Sensitivity of Marginal Contribution Analysis to the Use of the Conventional Gini Index • Appendix 2A: The Shapley Value • Simple Shapley Value • Simple Shapley Value: ZID Approach • Simple Shapley Value: EID Approach • Hierarchy-Shapley Value • Hierarchy-Shapley Value: Nested Shapley • Hierarchy-Shapley Value: Owen Decomposition • Concluding Remarks

Chapter 3: Measuring the Redistributive Impact of Taxes and Transfers in the Presence of Reranking
Ali Enami

Notations • Gini and Concentration Coefficients • Reynolds-Smolensky and Kakwani Indexes • The Relationship between the Redistributive Effect, Vertical Equity, and Reranking • Marginal Contribution • Vertical Equity • In the Presence of Reranking, Is the Marginal Contribution of a Tax Equalizing? • The Case of Only One Tax • The Case of Adding a Tax to a System That Has a Transfer in Place • The Case of Adding a Tax to a System with Multiple Taxes and Transfers in Place • In the Presence of Reranking, Is the Marginal Contribution of a Transfer Equalizing? • The Case of Only One Transfer • The Case of Adding a Transfer to a System That Has a Tax in Place • The Case of Adding a Transfer to a System with Multiple Taxes and Transfers in Place • Is the Total System More Equal? The Case of Adding a Tax and a Transfer • The Effect of a Marginal Change in One Tax or Transfer on the Equalizing (Unequalizing) Effect of a Whole System • The Case of a Marginal Change in a Tax • The Case of a Marginal Change in a Transfer • Lambert’s Conundrum Revisited

Chapter 4: Can a Poverty-Reducing and Progressive Tax and Transfer System Hurt the Poor?
Sean Higgins and Nora Lustig (reproduced from Journal of Development Economics)

Abstract • Introduction • The Problems with Conventional Measures • Poverty Measures • Horizontal Equity and Progressivity • Real-World Examples • Measures of Fiscal Impoverishment • Axioms • An Axiomatic Measure of Fiscal Impoverishment • Fiscal Impoverishment Dominance Criteria • Fiscal Gains of the Poor • An Axiomatic Measure of Fiscal Gains of the Poor • Decomposition of the Difference between Pre-Fisc and Post-Fisc Poverty • Illustration • Results for Seventeen Developing Countries • Results for a Range of Poverty Lines in Brazil • Conclusions • AcknowledgmentsAppendix 4A • FI Axioms • FGP Axioms • Proofs

Chapter 5: Measuring the Effectiveness of Taxes and Transfers in Fighting Inequality and Poverty
Ali Enami

Notation • New CEQ Effectiveness Indicators • Shortcomings of the 2013 Effectiveness Indicator • Impact and Spending Effectiveness Indicators • Impact Effectiveness • Spending Effectiveness • Fiscal Impoverishment and Gains Effectiveness Indicators • Conclusion

PART II: Implementation

Chapter 6: Allocating Taxes and Transfers and Constructing Income Concepts: Completing Sections A, B, and C of the CEQ Master Workbook
Sean Higgins and Nora Lustig

The CEQ Master Workbook • The Microdata: Description of the Household Survey and Data Harmonization Assumptions • Definition of Household • Unit of Analysis • Missing or Zero Incomes • Top Coding • Outliers and Extreme Values • Under-Reporting and Top Incomes • Adult Equivalence and Economies of Scale • Spatial Price Adjustments • Expressing Values in Annual Terms • Data on Fiscal Systems • Income Concepts: Definitions • Constructing Income Concepts: The Art of Allocating Taxes and Transfers Methods • Direct Identification • Inference • Imputation • Simulation • Prediction • Alternate Survey • Secondary Sources • Constructing Market Income and Market Income plus Pensions • Grossing Up • Negative Farm, Business, and Self-Employed Incomes • Imputed Rent for Owner-Occupied Housing • Value of Production for Own Consumption • Constructing Gross Income • Constructing Taxable Income • Constructing Net Market Income • Constructing Disposable Income • Constructing Consumable Income • Subtract Indirect Taxes • Add Indirect Subsidies • Constructing Final Income • Add In-Kind Transfers • Education • Scaling Down Education Benefits • Health • Scaling Down Health Benefits • Additional Concerns for In-Kind Transfers • Construction of Income Concepts in Practice: Additional Methodological Challenges • Using Consumption Instead of Income • Underestimation of Beneficiaries • Income Misreporting and Discrepancies between Survey and Administrative Data • Tax Expenditures • When the Year of the Survey Does Not Match the Year of Interest of the Analysis • Infrastructure and Other Public Goods • Additional Sensitivity Analyses • Completing Section C of the CEQ Master Workbook • Appendix 6A. Comparing the Definitions of Income Concepts between the United Nations’ Canberra Group Handbook on Household Income Statistics. 2011 and the CEQ Handbook (Ruoxi Li and Yang Wang)Income Definitions, Concepts, and Components • MethodologyAppendix 6B. EUROMOD: The Tax-Benefit Microsimulation Model for the European Union (Daria Popova)Appendix 6C. LATAX: A Multi-Country Flexible Tax Microsimulation Model (Laura Abramovsky and David Phillips)Appendix 6D. Correcting for Underestimating Number of BeneficiariesAppendix 6E. Definition of Household: Sensitivity Tests • Appendix 6F. Comparing Methods to Estimate the Value of Public Health Spending to Its Beneficiaries (Jeremy Barofsky and Stephen D. Younger)Average Cost • Average Cost and Actual Use • Average Cost and Insurance Value • Willingness to Pay • Health Outcomes • Financial Risk Protection • Appendix 6G. The CEQ Master Workbook: Contents

Chapter 7: Constructing Consumable Income: Including the Direct and Indirect Effects of Indirect Taxes and Subsidies
Jon Jellema and Gabriela Inchauste

Direct Impact of Subsidies and Taxes • Inelastic Demand • Homothetic Preferences • Indirect Impacts of Subsidies and TaxesTheory: The Price-Shifting Model • Methods for Generating Indirect Effect of Indirect Taxes • Practical Solutions for Indirect Effects • Software Options • Example Calculations: Steps 1 and 6–7 Taxes versus Subsidies • Summary and Conclusion Appendix 7A. Dealing with Taxes on Intermediate Stages of Production and Consumption James Alm

Chapter 8: Producing Indicators and Results, and Completing Sections D and E of the CEQ Master Workbook Using the CEQ Stata Package
Sean Higgins

Basic Concepts • Core Income Concepts • Fiscal Interventions • Income Components • Extended Income Concepts • Initial Income • End Income • Prefiscal Income • Postfiscal Income • Marginal Contribution • Progressivity and Pro-Poorness • Deciles • Poverty Lines • PPP Conversions Using 2005 ICP • PPP Conversions Using 2011 ICP • Income Groups • Sampling Weights and Stratification • The CEQ Master Workbook Sections D and E • Structure • Indicators • Inequality • Inequality of Opportunity • Poverty • Fiscal Impoverishment • Fiscal Gains of the Poor • Effectiveness Indicators • Progressivity Measures • Vertical and Horizontal Equity • Incidence and Concentration • Income Distribution • Fiscal Profiles • Concentration and Kakwani Coefficients • Coverage, Errors of Exclusion, Errors of Inclusion, and Errors of Social Programs • Fiscal Mobility Matrices • Education Enrollment Rates • Infrastructure Access • Sociodemographic Characteristics • Lorenz Curves • Concentration Curves • Cumulative Distribution Functions of Income • Comparison over Time • Descriptive Statistics • Population • Statistical Significance • Dominance Tests • Marginal Contributions to Inequality • Marginal Contributions to Poverty • Marginal Contributions to Vertical Equity and Reranking • Covariance • Assumption Testing • CEQ Stata Package • Preliminaries • Structure and Options • Income Concept Options • Fiscal Intervention Options • PPP Conversion Options • Survey Information Options • Poverty Line Options • Income Group Cut-Off Options • Produce a Subset of Results • Export Directly to the CEQ MWB • Option to Ignore Missing Values • Option to Allow Calculations of Indicators with Negative Values • Specific Commands • ceqdes • ceqpop • ceqextpop • ceqlorenz • ceqiop • ceqfi • ceqstatsig • ceqdom • ceqef • ceqconc • ceqfiscal • ceqextend • ceqmarg • ceqefext • ceqcov • ceqextsig • ceqdomext • ceqcoverage • ceqtarget • ceqeduc • ceqinfra • ceqhhchar • ceqindchar • ceqgraph • ceqassump

Chapter 9: Analyzing the Impact of Fiscal Policy on Ethno-Racial Inequality
Rodrigo Aranda and Adam Ratzlaff

Background Information • Sheet F1. Key Assumptions • Sheet F2. Ethno-Racial Definitions • Sheet F3. Ethno-Racial Populations • Sheet F4. Linked Information • Results • Sheet F5. Population Composition • Sheet F6. Income Distribution • Sheet F7. Summary Poverty Rates • Sheet F8. Summary Poverty Gap Rates • Sheet
F9. Summary Poverty Gap Squared Rates • Sheet F10. Summary Inequality Indicators • Sheet F11. Mean Incomes • Sheet F12. Incidence by Decile • Sheet F13. Incidence by Income Group • Sheet F14. Cross-Race Incidence • Sheet F15. Horizontal Equity • Sheet F16. Fiscal Profile • Sheet F17. Coverage Rates (Total Population) • Sheet F18. Coverage Rates (Target Population) • Sheet F19. Leakages • Sheet F20. Mobility Matrices • Sheet F21. Education (Totals) • Sheet F22. Education (Rates) • Sheet F23. Infrastructure Access • Sheet F24. Theil Decomposition • Sheet F25. Inequality of Opportunity • Sheet F26. Significance

PART III: Applications

Chapter 10: Fiscal Policy, Income Redistribution, and Poverty Reduction in Low- and Middle-Income Countries
Nora Lustig

Taxes and Public Spending: Levels and CompositionFiscal Policy and Inequality • Measuring the Marginal Contribution of Taxes and Transfers • Is There Evidence of a Robin Hood Paradox? • Redistributive Effect: A Comparison with Advanced Countries • Fiscal Policy and the Poor • Education and Health Spending • Conclusions

Chapter 11: Argentina: Taxes, Expenditures, Poverty, and Income Distribution
Dario Rossignolo

The Fiscal System in Argentina: Taxes and Expenditures • Direct Taxes • Indirect Taxes • Flagship Cash Transfer Program: The Universal Allowance per Child • Noncontributory Pensions • Other Cash and Near-Cash Transfers • Subsidies • Education and Health • Data Sources and Methodological Assumptions • Main Results • Impact on Inequality and Poverty • Coverage and Effectiveness of Direct Transfers • Incidence Analysis • Progressivity • Poverty • Fiscal Mobility • Conclusions

Chapter 12: Brazil: Fiscal Policy and Ethno-Racial Poverty and Inequality
Claudiney Pereira

Methodology • Definitions and Measurements • Social Spending and Taxation in Brazil • Data • Results • Inequality • Poverty • Conclusions

Chapter 13: Chile: The Impact of Fiscal Policy on Inequality and Poverty
Sandra Martinez-Aguilar, Alan Fuchs, Eduardo Ortiz-Juarez, and Giselle Del Carmen

Social Spending and Taxes in Chile • Methodology, Data, and Assumptions • Main Results • Redistributive Effects of Chile’s Fiscal System • Fiscal Redistribution in Chile: A Comparative Perspective • Conclusions • Appendix 13A. Marginal Contributions to Inequality by End Income Concept, Concentration Coefficients, and Kakwani  Indexes for All Fiscal Interventions

Chapter 14: The Dominican Republic: Fiscal Policy, Income Redistribution, and Poverty Reduction
Jaime Aristy-Escuder, Maynor Cabrera, Blanca Moreno-Dodson, and Miguel E. Sanchez-Martin

Methodology and Sources of Information • CEQ Methodology • Data Sources • Main Assumptions • Main Results • The Redistributional Impact of Taxes • Direct Taxes • Indirect Taxes • Social Spending in the Dominican Republic • Direct Transfers • Indirect Subsidies • In-Kind Transfers: Education and Health • Net Impact of the Fiscal System on Income Redistribution in the Dominican Republic • Fiscal Policy Instruments, Poverty, and Inequality • Is Fiscal Policy More or Less Redistributive and Pro-Poor than in Other Countries? • Income Redistribution: Vertical and Horizontal Equity and Effectiveness Indicators • Resource Needs to Fill In Coverage Gaps • Options for Enhancing the Equity Outcomes of Fiscal Policy in the Dominican Republic • Alternative VAT Scenarios for a Fiscal Impact Pact • Policy Options and Conclusion • Appendix 14A. Structure of Revenue and Expenditure

Chapter 15: El Salvador: The Impact of Taxes and Social Spending on Inequality and Poverty
Margarita Beneke de Sanfeliu, Nora Lustig, and Jose Andres Oliva Cepeda

Taxes and Public Spending • Fiscal Revenue: Taxes and Contribution Fees • Income Tax • Value-Added Tax • Special Fees: Fuel • Contributions to Social Security (Health) • Social Spending • Social Programs • Cash Transfers • Direct Transfers In-Kind • Subsidies • Electricity • Water • Public Transportation • Social Services: In-Kind Transfers • Education • Health • Women’s City • Contributory Pensions • Data • Methodology • Market Income • Disposable Income • Consumable Income • Final Income • Impact of Fiscal Policy on Inequality and Poverty • Coverage and Leakages • Conclusions • Recommendations • Appendix 15A. Estimating the Incidence of Consumption SubsidiesElectricity Subsidy • Public Transportation Subsidy • Water Subsidy • LP Gas Subsidy

Chapter 16: Ghana and Tanzania: The Impact of Reforming Energy Subsidies, Cash Transfers, and Taxes on Inequality and Poverty
Stephen D. Younger

Examples • Eliminating Energy Subsidies • Expanding Conditional Cash Transfers • Making Taxation More Progressive

Chapter 17: Iran: An Application of the CEQ Effectiveness Indicators
Ali Enami

Methodology • Data • Results: Effectiveness of Taxes and Transfers in Reducing Inequality and Poverty • Conclusions

Chapter 18: Tunisia: Fiscal Policy, Income Redistribution, and Poverty Reduction
Nizar Jouini, Nora Lustig, Ahmed Moummi, and Abebe Shimeles

Taxation and Social Spending in Tunisia • Taxation • Personal Income Tax • Social Security Contributions • Indirect Taxes • Corporate Taxes • Social Spending • Direct Transfers • Indirect Subsidies • In-Kind Transfers • Methodology and Data • Main AssumptionsThe Impact of Fiscal Policy on Inequality and Poverty • Who Benefits from Direct Transfers and Subsidies and Who Bears the Burden of Taxes? • Conclusions

Chapter 19: Uganda: The Impact of Taxes, Transfers, and Subsidies on Inequality and Poverty
Jon Jellema, Nora Lustig, Astrid Haas, and Sebastian Wolf

Social Spending and Taxation in Uganda • Social Spending and Subsidies • In-Kind Transfers • Direct Transfers • Indirect Subsidies • Revenues • Taxes • International Perspective on Fiscal Magnitudes and Composition • Methods and Data • Methodological Summary • Data Sources • Allocation Assumptions • Personal Income Taxes • Simulated Direct Transfers • VAT, Excise, and Fuel Excise: Based on Expenditure Records • Electricity and Water Subsidies • Agricultural Input Subsidy • In-Kind Transfers • Results • Does Fiscal Policy Have an Impact on Inequality and Poverty? • How Many Ugandans Are Impoverished by Taxes, Transfers, and Subsidies? • How Many Poor Ugandans Experience Income Gains via Fiscal Expenditures? • Market to Disposable Income: Pensions, Personal Income Taxes, and Direct Transfers • Disposable to Final Income: Indirect Taxes and Subsidies; In-Kind Health, and Education Expenditures • Redistribution, Reranking, and the Total Impact on Inequality • Conclusions and Policy Implications

PART IV: The CEQ (Commitment to Equity) Assessment Tools
Available only online at www.ceqinstitute.org, under “Handbook.”

1. Planning for a CEQ Assessment: Data and Software Requirements
CEQ Institute

2. Planning for a CEQ Assessment: Recommended Team Composition and Timeline
CEQ Institute

3. CEQ Assessment: CEQ Master Workbook (MWB)
CEQ Institute

4. CEQ Master Workbook: Example for Mexico, 2012
John Scott, Sandra Martinez-Aguilar, Enrique de la Rosa, Rodrigo Aranda

5. CEQ Do Files in Stata for Constructing Income Concepts: Example for Mexico, 2012
John Scott, Sandra Martinez-Aguilar, Enrique de la Rosa, and Rodrigo Aranda

6. CEQ Assessment: CEQ Stata Package
Sean Higgins, Rodrigo Aranda, and Ruoxi Li

7. CEQ Assessment: Sample Stata Code for Measuring the Indirect Effects of Indirect Taxes and Subsidies
CEQ Institute, adapted from the IMF’s “Distributional Analysis of Fuel Subsidy Reform (Stata Programs),” available for download from
https://www.imf.org/external/np/fad/subsidies/

 8. CEQ Assessment: Checking Protocol
Sandra Martinez-Aguilar, Adam Ratzlaff, Maynor Cabrera, Cristina Carrera, and Sean Higgins

About the Authors

Index

 

About the Editor:

Nora Lustig is Samuel Z. Stone Professor of Latin American Economics and Director of the Commitment to Equity Institute at Tulane University where she researches the impact of taxation and social spending on inequality and poverty, and the determinants of inequality. Her previous work includes Declining Inequality in Latin America: A Decade of Progress? and Shielding the Poor: Social Protection in the Developing World.


Target Audience:

This book can be used as a stand-alone reference for those interested in the methods for assessing the impact on equity of fiscal policy. This will serve as a textbook for advanced undergraduate and graduate courses on public finance and income distribution. It is also helpful for policymakers, economists, and social planners.

 

 

 
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