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On the middle 70%. The impact of fiscal policy on the emerging middle class in Latin America using Commitment to Equity

Author

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  • Daude, Christian
  • Lustig, Nora
  • Melguizo, Angel
  • Perea, Jose Ramon
Abstract
This paper analyzes the effects of indirect and direct taxes, as well as monetary and in-kind transfers on the income distribution in nine Latin American countries applying the CEQ methodology and using household and expenditure microdata around 2010. In particular, we focus on the effect of fiscal policies on two groups of the emerging middle class: the vulnerable and the middle class. We find that while the vulnerable tend to be net receivers in fiscal terms, especially when including in-kind transfers, the middle class seems to be mainly a net payer. This might be aggravated by the perception of a relatively low quality of in-kind transfers, notably in education and health-care services. We provide some evidence based on subjective surveys pointing in this direction.

Suggested Citation

  • Daude, Christian & Lustig, Nora & Melguizo, Angel & Perea, Jose Ramon, 2017. "On the middle 70%. The impact of fiscal policy on the emerging middle class in Latin America using Commitment to Equity," Research Department working papers 1087, CAF Development Bank Of Latinamerica.
    • Handle: RePEc:dbl:dblwop:1087
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    References listed on IDEAS

    as
    1. Lopez-Calva Luis F. & Rigolini Jamele & Torche Florencia, 2016. "Is there such thing as middle class values? Class differences, values and political orientations in Latin America," Journal of Globalization and Development, De Gruyter, vol. 7(2), pages 1-12, December.
    2. Alkire, Sabina & Foster, James & Seth, Suman & Santos, Maria Emma & Roche, Jose Manuel & Ballon, Paola, 2015. "Multidimensional Poverty Measurement and Analysis," OUP Catalogue, Oxford University Press, number 9780199689491.
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    4. Nora Lustig & Carola Pessino & John Scott, 2013. "The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico, Peru and Uruguay: An Overview," Working Papers 1313, Tulane University, Department of Economics.
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    6. -, 2016. "Economic Survey of Latin America and the Caribbean 2016: The 2030 Agenda for Sustainable Development and the challenges of financing for development," Estudio Económico de América Latina y el Caribe, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 40327 edited by Eclac.
    7. Nora Lustig & Sean Higgins, 2012. "Fiscal Incidence, Fiscal Mobility and the Poor: A New Approach," Working Papers 1202, Tulane University, Department of Economics.
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    9. -, 2016. "Latin American Economic Outlook 2017: Youth, Skills and Entrepreneurship," Coediciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 40722 edited by Eclac.
    10. Angel Melguizo, 2015. "Pensions, informality, and the emerging middle class," IZA World of Labor, Institute of Labor Economics (IZA), pages 169-169, July.
    11. Nancy Birdsall, 2010. "The (Indispensable) Middle Class in Developing Countries; or, The Rich and the Rest, Not the Poor and the Rest," Working Papers 207, Center for Global Development.
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    14. Easterly, William, 2001. "The Middle Class Consensus and Economic Development," Journal of Economic Growth, Springer, vol. 6(4), pages 317-335, December.
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    17. Nora Lustig & Carola Pessino & John Scott, 2014. "The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico, Peru, and Uruguay: Introduction to the Special Issue," Public Finance Review, , vol. 42(3), pages 287-303, May.
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    Cited by:

    1. Haydeeliz Carrasco & Hamidou Jawara & Moritz Meyer, 2022. "The Effects Of Fiscal Policy On Inequality And Poverty In The Gambia," Commitment to Equity (CEQ) Working Paper Series 117, Tulane University, Department of Economics.
    2. Eric Rougier & Jean‐Philippe Berrou & Matthieu Clément & François Combarnous & Dominique Darbon, 2021. "Should we call it a (middle) class? A socio‐economic exploration of the Vietnamese middle‐income group," Journal of International Development, John Wiley & Sons, Ltd., vol. 33(8), pages 1321-1345, November.

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    More about this item

    Keywords

    Desarrollo social; Economía; Impuestos; Investigación socioeconómica;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General

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