Fiscal Redistribution and Social Welfare

Author/Editor:

David Coady ; Devin D'Angelo ; Brooks Evans

Publication Date:

March 8, 2019

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

Fiscal policy is a key tool for achieving distributional objectives in advanced economies. This paper embeds the discussion of fiscal redistribution within the standard social welfare framework, which lends itself to a transparent and practical evaluation of the extent and determinants of fiscal redistribution. Differences in fiscal redistribution are decomposed into differences in the magnitude of transfers (fiscal effort) and in the progressivity of transfers (fiscal progressivity). Fiscal progressivity is further decomposed into differences in the distribution of transfers across income groups (targeting performance) and in the social welfare returns to targeting due to varying initial levels of income inequality (targeting returns). This decomposition provides a clear distinction between the concepts of progressivity and targeting, and clarifies the relationship between them. For illustrative purposes, the framework is applied to data for 28 EU countries to determine the factors explaining differences in their fiscal redistribution and to discuss patterns in fiscal redistribution highlighted in the literature.

Series:

Working Paper No. 19/51

Subject:

English

Publication Date:

March 8, 2019

ISBN/ISSN:

9781484398081/1018-5941

Stock No:

WPIEA2019051

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

30

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