Government Redistribution and Development Global Estimates of Tax and Transfer Progressivity 1980-2019

Matthew Fisher-Post and Amory Gethin
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Matthew Fisher-Post: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: This article builds and analyzes a new database on the distributional incidence of taxes and transfers in 151 countries from 1980 to 2019. Our estimates allocate the entirety of tax revenue and public expenditure to individuals, combining household surveys, national accounts, government budgets, tax simulators, and existing fiscal incidence studies. We establish five main findings. (1) Tax-and-transfer systems always reduce inequality, but with large variations. (2) About 90% of these variations are driven by transfers, while only 10% come from taxes. (3) Redistribution rises with development, but this is entirely due to transfers; tax progressivity is uncorrelated with per capita income. (4) Redistribution has increased in most world regions, except in Africa and Eastern Europe, where it has stagnated. (5) About 80% of variations in posttax inequality are driven by differences in pretax inequality ("predistribution"), while 20% are driven by the direct effect of taxes and transfers ("redistribution"). Countries with higher redistribution display lower levels of pretax inequality, however, pointing to a potentially large role of redistributive policies in indirectly shaping the distribution of market incomes.

Date: 2023-11
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Working Paper: Government Redistribution and Development Global Estimates of Tax and Transfer Progressivity 1980-2019 (2023)
Working Paper: Government Redistribution and Development Global Estimates of Tax and Transfer Progressivity 1980-2019 (2023)
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