Fiscal Policy and Income Distribution: Measurement for Argentina 1995 – 2010
Journal Title: Review of Economics & Finance - Year 2016, Vol 6, Issue 2
Abstract
This paper studies the effect of consolidated –national and provincial– fiscal policy on personal income distribution in Argentina, building a novel panel data for 1995-2010. We find that fiscal policy reduces income inequality, summarized with the Gini coefficient, by 0.06 in 1995-2001 (out of an ex ante average value of 0.490), and 0.08 in 2003-2010 (out of 0.497). Expenditures (mainly social services) are the tool for redistribution because taxes are regressive. Provincial expenditures account for two-thirds of the reduction in the Gini coefficient, indicating that there is no incompatibility between decentralization and redistribution. The contribution in-kind expenditures to redistribution is more important than that of cash transfers; although the latter gain relevance in 2003-2010. The impact of social expenditures and income taxes on the Gini coefficient is similar to effects found in other Latin American countries, but significantly lower than results found for OECD and European Union countries. The case of Argentina may provide useful lessons for other federal countries, in particular, considering all the expenditures and taxes and the responsibility of the different levels of governments and their effect on income distribution.
Authors and Affiliations
Walter Cont, Alberto Porto
Keywords
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