Designing Fiscal Redistribution: The Role of Universal and Targeted Transfers

Author/Editor:

David Coady ; Nghia-Piotr Le

Publication Date:

June 26, 2020

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:

There is a growing debate on the relative merits of universal and targeted social assistance transfers in achieving income redistribution objectives. While the benefits of targeting are clear, i.e., a larger poverty impact for a given transfer budget or lower fiscal cost for a given poverty impact, in practice targeting also comes with various costs, including incentive, administrative, social and political costs. The appropriate balance between targeted and universal transfers will therefore depend on how countries decide to trade-off these costs and benefits as well as on the potential for redistribution through taxes. This paper discusses the trade-offs that arise in different country contexts and the potential for strengthening fiscal redistribution in advanced and developing countries, including through expanding transfer coverage and progressive tax financing.

Series:

Working Paper No. 20/105

Subject:

English

Publication Date:

June 26, 2020

ISBN/ISSN:

9781513547046/1018-5941

Stock No:

WPIEA2020105

Format:

Paper

Pages:

27

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