nep-lam New Economics Papers
on Central and South America
Issue of 2024‒02‒19
four papers chosen by

  1. Fiscal Policy, Income Redistribution, and Poverty Reduction in Latin America By Nora Lustig; Valentina Martinez Pabon; Carola Pessino
  2. Seventy-five years of measuring income inequality in Latin America By Facundo Alvaredo; Francois Bourguignon; Francisco Ferreira; Nora Lustig
  3. Inequality in the early years in LAC: a comparative study of size, persistence, and policies By Attanasio, Orazio; Lopez-Boo, Florencia; Perez-Lopez, Diana; Reynolds, Sarah Anne
  4. Independent fiscal institutions: A typology of OECD institutions and a roadmap for Latin America By Aida Caldera Sánchez; Paula Garda; Alberto González Pandiella; Alessandro Maravalle; Diego Rodriguez; Elena Rovenskaya

  1. By: Nora Lustig (Tulane University); Valentina Martinez Pabon (Yale University); Carola Pessino (IDB)
    Abstract: This paper uses standard fiscal incidence analysis to study how much income redistribution and poverty reduction are accomplished through the fiscal system in eighteen Latin American and Caribbean (LAC) countries. We show there is considerable heterogeneity in the income inequality and poverty-reducing power of LAC fiscal systems. While all LAC fiscal systems reduce income inequality, fiscal systems in nine LAC countries are poverty-increasing, and this startling characteristic has not improved over time. When analyzing specific fiscal elements, we find that direct taxes, direct transfers, and in-kind transfers are all equalizing, and spending on education and health is often pro-poor. Moreover, contrary to expectations, indirect taxes and subsidies are more frequently equalizing than unequalizing.
    Keywords: Fiscal policy, inequality, poverty, Latin America
    JEL: D31 D6 E62 H22 I32
    Date: 2024–01
  2. By: Facundo Alvaredo; Francois Bourguignon; Francisco Ferreira; Nora Lustig
    Abstract: Drawing on a comprehensive compilation of quantile shares and inequality measures for 34 countries, including over 5, 600 estimated Gini coefficients, we review the measurement of income inequality in Latin America and the Caribbean over the last seven decades. Although the evidence from the first quarter century -- roughly until the 1970s -- is too fragmentary and difficult to compare, clearer patterns emerge for the last fifty years. The central feature of these patterns is a broad inverted U curve, with inequality rising in most countries prior to the 1990s, and falling during the early 21st Century, at least until the mid-2010s, when trends appear to diverge across countries. This broad pattern is modified by country specificities, with considerable variation in timing and magnitude. Whereas this broad picture emerges for income inequality dynamics, there is much more uncertainty about the exact levels of inequality in the region. The uncertainty arises from the disparity in estimates for the same country/year combinations, depending on whether they come from household surveys exclusively; from some combination of surveys and administrative tax data; and on whether they attempt to scale income aggregates to achieve consistency with National Accounts estimates. Since no single method is fully convincing at present, we are left with (often wide) ranges, or bands, of inequality as our best summaries of inequality levels. Reassuringly, however, the dynamic patterns are generally robust across the bands.
    Keywords: income inequality, measurement, Latin America and the Caribbean
    JEL: D31 D63 O54
    Date: 2024–01
  3. By: Attanasio, Orazio; Lopez-Boo, Florencia; Perez-Lopez, Diana; Reynolds, Sarah Anne
    Abstract: Gaps in child development by socioeconomic status (SES) start early in life, are large and can increase inequalities later in life. We use recent national-level, cross-sectional and longitudinal data to examine inequalities in child development (namely, language, cognition, and socio-emotional skills) of children 0-5 in five Latin American countries (Chile, Colombia, Mexico, Peru and Uruguay). In the cross-section analysis, we find statistically significant gaps with inequality patterns that widely differ across countries. For instance, gaps in language and cognition for Uruguay and Chile are much smaller than those for Colombia and Peru. When turning to the longitudinal data, average SES gaps are similar to those of the cross-section in language but differ substantially in cognition, mainly in Uruguay where they emerge as more unequal when cohort effects do not operate. Importantly, we also find that the ECD gaps found at early ages (0-5), still manifest 6-12 years later in almost all locations and realms in which we have measures of early child development, but they do not increase with age. Results are robust to using different measures of inequality (income and maternal education). Gaps are smaller but generally remain when adjusting for possible explanatory factors (e.g., family structure, parental education, geographic fixed effects). To reduce ECD inequality and promote equality in later life outcomes, policymakers should look to implementing evidence-based interventions at scale to improve developmental outcomes of the most disadvantaged children in society.
    JEL: I00
    Date: 2024–01–01
  4. By: Aida Caldera Sánchez; Paula Garda; Alberto González Pandiella; Alessandro Maravalle; Diego Rodriguez; Elena Rovenskaya
    Abstract: The paper reviews the diverse experience of OECD countries in establishing and running independent fiscal institutions, offering insights that could be useful for Latin American countries seeking to set-up and strengthen those institutions in the region. Through cluster analysis, we identify different types of OECD independent fiscal institutions and draw practical lessons from cases studies. We also identify key features that could serve as a road map for Latin American countries in their efforts to establish or enhance independent fiscal institutions.
    Keywords: Fiscal Councils, Fiscal forecasts, Fiscal rule compliance, Independent fiscal institutions
    JEL: E61 E62 H1 H6
    Date: 2024–01–31

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