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The effect of fiscal drag on income distribution and work incentives: A microsimulation analysis on selected African countries

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  • Adnan Abdulaziz Shahir
  • Francesco Figari

Abstract

Although the effect of fiscal drag is well studied in the industrialized world, empirical evidence from developing economies remains limited. Against this backdrop, this study aims to explore the effect of fiscal drag on income distribution and work incentives. To this end, the study employs SOUTHMOD, the tax-benefit microsimulation model, for six African countries: Ethiopia, South Africa, Tanzania, Uganda, Mozambique, and Zambia. Three important conclusions are drawn from our empirical investigation.

Suggested Citation

  • Adnan Abdulaziz Shahir & Francesco Figari, 2021. "The effect of fiscal drag on income distribution and work incentives: A microsimulation analysis on selected African countries," WIDER Working Paper Series wp-2021-167, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2021-167
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    References listed on IDEAS

    as
    1. Aaron, Henry J, 1976. "Inflation and the Income Tax," American Economic Review, American Economic Association, vol. 66(2), pages 193-199, May.
    2. Atkinson, Anthony B., 2015. "Inequality: what can be done?," LSE Research Online Documents on Economics 101810, London School of Economics and Political Science, LSE Library.
    3. André Decoster & Jukka Pirttilä & Holly Sutherland & Gemma Wright, 2019. "SOUTHMOD: Modelling Tax-benefit Systems in Developing Countries," International Journal of Microsimulation, International Microsimulation Association, vol. 12(1), pages 1-12.
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    Keywords

    Inflation; Income tax; Fiscal drag; Fiscal redistribution; Africa; Microsimulation; Income distribution;
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