nep-lam New Economics Papers
on Central and South America
Issue of 2017‒04‒23
five papers chosen by

  1. The Impact of the Tax System and Social Expenditure on the Distribution of Income and Poverty in Latin America (Spanish) - Working Paper 450 By Nora Lustig
  2. Differences between self-employed and employed mothers in balancing family and work responsibilities: Evidence from Latin American countries By Juan Carlos, Campaña; J. Ignacio, Giménez-Nadal; Jose Alberto, Molina
  3. Fiscal Policy, Income Redistribution and Poverty Reduction in Low and Middle Income Countries - Working Paper 448 By Nora Lustig
  4. Subsidized Home–ownership Programs, Transaction Costs, and Domestic Violence By Bruno Cardinale Lagomarsino; Martín Rossi
  5. Do Payroll Tax Breaks Stimulate Formality? Evidence from Colombia’s Reform By Adriana Kugler; Maurice Kugler; Luis Omar Herrera Prada

  1. By: Nora Lustig
    Abstract: This paper presents results on the impact of fiscal policy on inequality and poverty in sixteen Latin American countries around 2010. The countries that redistribute the most are Argentina, Brazil, Costa Rica and Uruguay, and the least, Guatemala, Honduras and Peru. At higher social spending, greater redistribution is achieved, but countries with a similar level of social spending show different levels of redistribution which suggests that other factors such as the composition and targeting of the expenditures are involved in determining the redistributive effect beyond its size. Fiscal policy reduces extreme poverty in twelve countries. However, the incidence of poverty after taxes, subsidies and monetary transfers is higher than the pre-fisc poverty rate in Bolivia, Guatemala, Honduras, and Nicaragua, even when fiscal policy does reduce inequality. Expenditure on pre-school and primary education is equalizing and pro-poor in all countries. Spending on secondary education is equalizing in all countries and also pro-poor in some countries but not all. Expenditure on tertiary education is never pro-poor, but it is equalizing, with the exception of Guatemala, where it is regressive and unequalizing and in Venezuela, where its redistributive effect is zero. Health spending is always equalizing but it is pro-poor only in Argentina, Brazil, Chile, Costa Rica, Ecuador, the Dominican Republic, Uruguay and Venezuela.
    Keywords: fiscal incidence, inequality, poverty, taxes, transfers, Latin America
    JEL: D31 H22 I38
    Date: 2017–03
  2. By: Juan Carlos, Campaña; J. Ignacio, Giménez-Nadal; Jose Alberto, Molina
    Abstract: In this paper, we analyze how self-employed and employed mothers in several Latin American countries allocate their time throughout the day in order to balance their family and work responsibilities. Using data from time-use surveys for Mexico (2009), Peru (2010), Panama (2011), Ecuador (2012) and Colombia (2012), we find that self-employed mothers devote less time to paid work and more time to unpaid work and child care, compared to employed mothers, in the five countries. Our results are consistent with the hypothesis that working mothers may want to decrease the number of hours they devote to paid work, and devote more time to their household responsibilities, and that self-employment may be used as a tool for this purpose. Thus, self-employment in Latin American countries may be seen as an instrument to improve the work-life balance of mothers.
    Keywords: self-employment; paid work, unpaid work, child care, Latin America
    JEL: D13 J13 J22
    Date: 2017–03–28
  3. By: Nora Lustig
    Abstract: Current policy discussion focuses primarily on the power of fiscal policy to reduce inequality. Yet, comparable fiscal incidence analysis for 28 low and middle income countries reveals that, although fiscal systems are always equalizing, that is not always true for poverty. In Ethiopia, Tanzania, Ghana, Nicaragua, and Guatemala the extreme poverty headcount ratio is higher after taxes and transfers (excluding in-kind transfers) than before. In addition, to varying degrees, in all countries a portion of the poor are net payers into the fiscal system and are thus impoverished by the fiscal system. Consumption taxes are the main culprits of fiscally-induced impoverishment. Net direct taxes are always equalizing and indirect taxes net of subsidies are equalizing in nineteen countries of the 28. While spending on pre-school and primary school is pro-poor (i.e., the per capita transfer declines with income) in almost all countries, pro-poor secondary school spending is less prevalent, and tertiary education spending tends to be progressive only in relative terms (i.e., equalizing but not pro-poor). Health spending is always equalizing but not always pro-poor. More unequal countries devote more resources to redistributive spending and appear to redistribute more. The latter, however, is not a robust result across specifications.
    Keywords: fiscal incidence, social spending, inequality, poverty, developing countries
    JEL: H22 H5 D31 I3
    Date: 2017–01
  4. By: Bruno Cardinale Lagomarsino (Universidad de San Andrés); Martín Rossi (Department of Economics, Universidad de San Andres)
    Abstract: We exploit the random assignment rule implemented by the government of the municipality of Salto (Argentina) in its program of social housing in order to identify the effect of the program on subsequent domestic violence. Beneficiaries receive a finished house in exchange for a long-term credit at a heavily subsidized rate, and are entitled to legal ownership after full payment. Using administrative records from the population of applicants, we find that subsidized home-ownership programs to low-income households are associated to an increase in reported domestic violence. We explore various potential mechanisms and we conclude that the empirical evidence only favors the mechanism of an increase in transaction costs associated to exiting a relationship.
    Keywords: transaction costs, marriage, domestic violence
    JEL: K36 H31 J12
    Date: 2017–04
  5. By: Adriana Kugler; Maurice Kugler; Luis Omar Herrera Prada
    Abstract: Alternative work arrangements have grown rapidly around the world. In Latin America, these alternative work arrangements have long been part of the labor market and have continued to grow. The informal sector grew rapidly in Latin America over the past few decades comprising up to half of the working population in many countries. Some attribute the growth in alternative work arrangements and informality to regulations and taxes, while others argue that it is precisely the lack of enforcement of regulations that allows unprotected employment arrangements to flourish. We examine whether reducing taxes associated with employment stimulates formal sector employment. We exploit the fact that the Tax Reform introduced in Colombia in 2012 affected only certain types of workers and not others. In particular, workers earning less than 10 minimum wages (MW) and self-employed workers with more than 2 employees experienced a reduction of payroll taxes of 13.5% between 2013 and 2014. We use the Colombian Household Surveys, Social Security records and the Monthly Manufacturing Sample to conduct difference-in-difference analyses of the reform. We find evidence of increased formal employment for the affected groups after the reform using all three datasets. We find that the probability of formal employment and the likelihood of transitioning into registered employment increased for the affected groups after the reform. We also find that the level and share of permanent employment relative to temp employment grew after the reform for those earnings less than 10 MW. The results are greatest for those in smaller firms and those earnings close to the MW.
    JEL: H2 J2 J24 J31
    Date: 2017–04

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