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The Effects of Fiscal Policy on Poverty and Inequality in Tajikistan

Author

Listed:
  • Dalmacio
  • William Seitz
  • Jon Jellema
  • Maya Goldman

Abstract

The design of fiscal policies can either improve or worsen poverty and inequality. To quantify the effects of government taxation and social spending on measures of poverty and inequality in Tajikistan, we use the Commitment to Equity (CEQ) Assessment method with data from a survey called Listening to Tajikistan (2015) and fiscal data from administrative sources over the same period. We find that fiscal policy in Tajikistan contributes to an increase in the poverty rate (at the $US PPP 3.20 per person per day poverty line) by 5.12 percentage points. The results also show that the fiscal system achieves some modest redistribution despite a relatively small social expenditure budget. Although some transfers are well-targeted in Tajikistan, direct and indirect taxes fall heavily on poorer households and offset the poverty-reducing effect of public expenditures. The size of the main targeted social assistance program is insufficient to either remarkably reduce poverty or compensate for tax contributions among the poorest households. The findings suggest that social expenditures intended for the poor do not in practice reach their targets, and expenditures on universal services such as education and health care are spread evenly across the population. The strongest options for greater redistribution to support poor and vulnerable households include i) improved targeting of public expenditures, ii) greater progressivity by redesigning tax policy to collect a larger share of revenue from higher income people, and iii) larger transfer budgets for the best targeted expenditures such as Targeted Social Assistance (TSA).

Suggested Citation

  • Dalmacio & William Seitz & Jon Jellema & Maya Goldman, 2021. "The Effects of Fiscal Policy on Poverty and Inequality in Tajikistan," Commitment to Equity (CEQ) Working Paper Series 108, Tulane University, Department of Economics.
  • Handle: RePEc:tul:ceqwps:108
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    File URL: http://repec.tulane.edu/RePEc/ceq/ceq108.pdf
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    References listed on IDEAS

    as
    1. Ali Enami, 2017. "Measuring the Effectiveness of Taxes and Transfers in Fighting Inequality and Poverty," Commitment to Equity (CEQ) Working Paper Series 64, Tulane University, Department of Economics.
    2. Higgins, Sean & Lustig, Nora, 2016. "Can a poverty-reducing and progressive tax and transfer system hurt the poor?," Journal of Development Economics, Elsevier, vol. 122(C), pages 63-75.
    3. Artur Kochnakyan & Ani Balabanyan & Zhengjia Meng & Bastiaan Verink, 2013. "Tajikistan : Financial Assessment of Barki Tojik," World Bank Publications - Reports 17009, The World Bank Group.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Fiscal Incidence; Fiscal Policy and Inequality; Income Inequality; Poverty; Social Spending; Social Assistance; Taxation; Tajikistan;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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