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 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.

Bibliographic Details

Main Author:	Essama-Nssah, B.
Language:	English
Published:	World Bank, Washington, DC 2008-04
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 https://hdl.handle.net/10986/6725
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