Fiscal policy, income redistribution and poverty reduction in Argentina

Abstract

We apply the Commitment to Equity (CEQ) Institute methodology to develop a fiscal incidence analysis of Argentina’s tax-spending system and measure the impact it has on inequality and poverty. Making identifying assumptions and leveraging microdata from Argentina’s income survey 2017 second semester waves and other diverse surveys, we conclude that Argentina’s fiscal system is both inequality and poverty reducing. In our main scenario, inequality is reduced by 17 Gini coefficient points and poverty rate by 6 percentage points. Even more, given the standardized CEQ methodology, cross-country comparisons are carried and Argentina turns out to be the Latin American country that most reduces inequality and poverty via government intervention. Nevertheless, this comes also at the highest cost in budgetary terms, leading up to questions about the system’s “efficiency”.