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on Central and Western Asia |
| By: | Stéphane Gauthier (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Taraneh Tabatabai (UP1 - Université Panthéon-Sorbonne) |
| Abstract: | We use the Targeted Subsidies Reform implemented in Iran in 2011 to recover empirically the social valuations of Iranian households relying on the assumption of optimal taxes. Unlike the existing literature, we do not restrict attention to a specific pattern for the incentive constraints associated with nonlinear income taxation. Instead we recover the Lagrange multipliers corresponding to these constraints. We find evidence of a significant redistribution toward the bottom three deciles of the income distribution before the reform. This redistribution is however limited by an incentive constraint where the rich envy the social treatment of the poor. At the outcome of the reform incentives no longer matter and the social welfare function of the government of Iran displays a Benthamite-like form. |
| Keywords: | Principal-agent,incentive constraints,Iran,Targeted Subsidies,social valuations,AIDS, D82, H21, L51 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-01545856&r=cwa |
| By: | Ali Enami (Department of Economics, Tulane University) |
| Abstract: | This chapter provides an application of the new CEQ effectiveness indicators for the case of Iran. The Impact and Spending Effectiveness indicators are used to assess the performance of the taxes and transfers in reducing inequality while Fiscal Impoverishment and Gains Effectiveness indicator is utilized to measure the performance of the components of the Iran's fiscal system with regard to the reduction in poverty (or not exacerbating it in the case of taxes). I find that in the case of Iran, transfers are relatively more effective in reducing inequality than taxes. For example, direct transfers together realize about 40% of their potential to reduce inequality while direct taxes together only realize about 20% of their potential. Direct and indirect taxes are especially effective in raising revenue without causing poverty to rise, a desirable property of fiscal systems. While transfers are not targeted toward the poor, they reduce poverty significantly. The main driver is the Targeted Subsidy Program (TSP), a universal cash transfer program implemented in 2010 to compensate individuals for the elimination of energy subsidies. In spite of its large poverty reducing impact, the effectiveness of TSP is rather low because of its universality. |
| Keywords: | Inequality, poverty, fiscal incidence, marginal contribution, effectiveness indicator, Iran |
| JEL: | D31 H22 I38 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:tul:wpaper:1712&r=cwa |