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CEQ Working Paper No 33: Can a Poverty-Reducing and Progressive Tax and Transfer System Hurt the Poor?


Can a Poverty-Reducing and Progressive Tax and Transfer System Hurt the Poor?
CEQ Working Paper No. 33

A working document by:
Sean Higgins
Tulane University
Nora Lustig
Tulane University

Abstract
Whether the poor are helped or hurt by taxes and transfers is generally determined by comparing income distributions before and after fiscal policy using stochastic dominance tests and measures of progressivity and horizontal inequity. We formally show that these tools can fail to capture an important aspect: that a substantial proportion of the poor are made poorer (or non-poor made poor) by the tax and transfer system. We call this fiscal impoverishment, and axiomatically derive a measure of its extent. An analogous measure of fiscal gains of the poor is also derived, and we show that changes in the poverty gap can be decomposed into our axiomatic measures of fiscal impoverishment and gains. We also establish dominance criteria for unambiguous comparisons of fiscal impoverishment and gains under the current system to that under a proposed reform, for a range of possible poverty lines. We illustrate using Brazilian data.

Access the working document here:
Updated April 2015
CEQ Working Paper No. 33: Can a Poverty-Reducing and Progressive Tax and Transfer System Hurt the Poor?

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Latin American Writers Series: Alberto Barrera Tyszka

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Ecuadorian writer and Tulane Visiting Scholar Gabriela Alemán interviews Venezuelan writer Alberto Barrera Tyszka about his life, interests, and influences. Their discussion will be followed by an open Q&A and an informal reception. This event will be held in Spanish.

About the Latin American Writers Series

This series brings together Latin America’s most representative creative voices and the editorial entrepreneurs that publish them. By way of interviews conducted by renowned Ecuadorian writer Gabriela Alemán and presentations of various editorial missions, the guests will shed light on a literary world shaped by the contemporary issues of the continent. Moving forward, their conversations will comprise the centerpiece of a digital archive that introduces their ideas to a global audience.

Este serie reúne a los autores más representativos de la escritura continental y los editores que los publican. A través de entrevistas con la reconocida escritora ecuatoriana Gabriela Alemán y presentaciones de proyectos editoriales, los invitados explorarán los vínculos entre el mundo literario y la realidad continental. Sus conversaciones se convertirán después en el eje de un archivo digital que busca llevar estas ideas a un público global.

About the Author

Born in Caracas, Alberto Barrera Tyszka has published over a dozen works of poetry, short story, chronicle, novel, and biography. His most recent publications include the novels Patria o Muerte (2015) and Rating (2011), the poetic anthology La inquietud (2013), the collection of chronicles Un país a la semana (2013), and the short story collection Crímenes (2009). In 2005, he collaborated with Cristina Marcano to write the definitive biography of Hugo Chávez, Hugo Chávez sin uniforme: una historia personal (2005). Patria o muerte won the 2015 Premio Tusquets de Novela, and his novel La enfermedad, translated into English as The Sickness (2010), received the 2006 Herralde Award. Barrera also writes for television and has scripted soap operas for Venezuelan, Mexican, Colombian, and Argentinian networks.