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Progressivity of Taxes and Transfers: the Mexican Case 2012

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Listed:
  • Luis Huesca
  • Abdelkrim Araar

Abstract

The paper examines the redistributive effect achieved by the tax-benefit system in Mexico in 2012 using personal income tax, indirect taxes, social security contributions and social benefits. Our goal is to analyze progressivity of the fiscal system and go further to demonstrate how the different taxes and benefits contribute to the total redistribution effect. A set of popular tools of studying progressivity, such as the concentration curves and Kakwani progressivity index, are used. In addition, we propose an analytical method to decompose the total progressivity measured by the contributions of different taxes or benefits. We conclude that Mexican tax-benefit system is progressive, with greater pre-fiscal income inequality and high redistributive effect for some specific figures of transfers. The contribution from Vertical Equity (VE) is relatively important, but Horizontal Inequity (HI) lightens its impact. Income taxation does not contribute largely to VE. Further, some program benefits target unequally the deprived population, and then decreases the positive effect induced by VE.

Suggested Citation

  • Luis Huesca & Abdelkrim Araar, 2014. "Progressivity of Taxes and Transfers: the Mexican Case 2012," Cahiers de recherche 1407, CIRPEE.
    • Handle: RePEc:lvl:lacicr:1407
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    File URL: http://www.cirpee.org/fileadmin/documents/Cahiers_2014/CIRPEE14-07.pdf
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    References listed on IDEAS

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    1. Lustig, Nora & Gray Molina, George & Higgins, Sean & Jaramillo, Miguel & Jiménez, Wilson & Paz, Verónica & Pereira, Claudiney & Pessino, Carola & Scott, John & Yáñez, Ernesto, 2012. "The impact of taxes and social spending on inequality and poverty in Argentina, Bolivia, Brazil, Mexico and Peru: a synthesis of results," Research Department working papers 234, CAF Development Bank Of Latinamerica.
    2. Mitja Čok & Ivica Urban & Miroslav Verbič, 2013. "Income Redistribution through Taxes and Social Benefits: The Case of Slovenia and Croatia," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(5), pages 667-686.
    3. Jean-Yves Duclos, 2006. "Equity and Equality," Cahiers de recherche 0629, CIRPEE.
    4. Makdissi, Paul & Wodon, Quentin, 2002. "Consumption dominance curves: testing for the impact of indirect tax reforms on poverty," Economics Letters, Elsevier, vol. 75(2), pages 227-235, April.
    5. Duclos, Jean-Yves & Makdissi, Paul & Wodon, Quentin, 2005. "Poverty-dominant program reforms: the role of targeting and allocation rules," Journal of Development Economics, Elsevier, vol. 77(1), pages 53-73, June.
    6. Sami Bibi & Jean‐Yves Duclos, 2010. "A Comparison Of The Poverty Impact Of Transfers, Taxes And Market Income Across Five Oecd Countries," Bulletin of Economic Research, Wiley Blackwell, vol. 62(4), pages 387-406, October.
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    8. Daniel Flores Curiel, 2003. "Un incremento en la tasa del IVA sobre los alimentos: ¿eficiencia, equidad o recaudación?," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 1-14, November.
    9. Jean-Yves Duclos, 2006. "Innis Lecture: Equity and equality," Canadian Journal of Economics, Canadian Economics Association, vol. 39(4), pages 1073-1104, November.
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    Cited by:

    1. Abdelkrim Araar & Luis Huesca, 2014. "Comparison of the Tax System Progressivity Over Time: Theory and Application with Mexican Data," Cahiers de recherche 1419, CIRPEE.
    2. Luis Huesca Reynoso & Abdelkrim Araar, 2016. "Comparison of fiscal system progressivity over time: theory and application in Mexico," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 31(1), pages 3-45.

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    More about this item

    Keywords

    Progressivity; Redistribution; Taxes; Benefits; Targeting;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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