Designing Fiscal Redistribution: The Role of Universal and Targeted Transfers

June 26, 2020

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Format: Chicago

David Coady, and Nghia-Piotr Le. Designing Fiscal Redistribution: The Role of Universal and Targeted Transfers, (USA: International Monetary Fund, 2020) accessed December 21, 2024

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.

Subject: Fiscal redistribution, Income inequality, Income tax systems, National accounts, Personal income, Poverty, Taxes

Keywords: Consumption taxation, Cost, Earned income, East Africa, Efficiency cost, Fiscal redistribution, Global, Income, Income inequality, Income redistribution objective, Income share, Income tax schedule, Income tax systems, Income transfer, Means testing, Middle East, North Africa, Personal income, Poverty impact, Poverty line, Progressive tax, Public spending, Redistribution objective, Sub-Saharan Africa, Targeted, Taxation framework, Taxes, Transfer program, Transfers, Universal, WP

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/105
Stock No:

WPIEA2020105
ISBN:

9781513547046
ISSN:

1018-5941

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