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Fiscal Policy, Inequality and Poverty in Iran: Assessing the Impact and Effectiveness of Taxes and Transfers

Author

Listed:
  • Ali Enami

    (Department of Economics, Tulane University)

  • Nora Lustig

    (Department of Economics, Tulane University)

  • Alireza Taqdiri

    (Department of Economics, University of Akron)

Abstract

Using the Iranian Household Expenditure and Income Survey for 2011/12, we estimate the impact and effectiveness of various components of Iran's fiscal system on reducing inequality and poverty. We utilize the marginal contribution analysis to determine the impact of each component, and we introduce newly developed indicators of effectiveness to calculate how well various taxes and transfers are operating to reduce inequality and poverty. We find that the fiscal system reduces the poverty-head-count-ratio by 10.5 percentage points and inequality by 0.0854 Gini points. Transfers are generally more effective in reducing inequality than taxes while taxes are especially effective in raising revenue without causing poverty to rise. Although transfers are not targeted toward the poor, they reduce poverty significantly. The main driver is the Targeted Subsidy Program (TSP), and we show through simulations that the poverty reducing impact of TSP could be enhanced if resources were more targeted to the bottom deciles.

Suggested Citation

  • Ali Enami & Nora Lustig & Alireza Taqdiri, 2016. "Fiscal Policy, Inequality and Poverty in Iran: Assessing the Impact and Effectiveness of Taxes and Transfers," Working Papers 1605, Tulane University, Department of Economics, revised Sep 2017.
    • Handle: RePEc:tul:wpaper:1605
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    File URL: http://repec.tulane.edu/RePEc/pdf/tul1605r.pdf
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    References listed on IDEAS

    as
    1. Mr. Dominique M. Guillaume & Mr. Roman Zytek & Mr. Mohammad Reza Farzin, 2011. "Iran: The Chronicles of the Subsidy Reform," IMF Working Papers 2011/167, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Fiscal Policy, Inequality, and Poverty in Iran: Assessing the Impact and Effectiveness of Taxes and Transfers
      by pmakdissi in NEP-ARA blog on 2017-05-15 23:50:40

    Citations

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    Cited by:

    1. Nora Lustig, 2017. "Fiscal Policy, Income Redistribution and Poverty Reduction in Low and Middle Income Countries," Commitment to Equity (CEQ) Working Paper Series 54, Tulane University, Department of Economics.
    2. Pessino, Carola & Izquierdo, Alejandro & Vuletin, Guillermo, 2018. "Better Spending for Better Lives: How Latin America and the Caribbean Can Do More with Less," IDB Publications (Books), Inter-American Development Bank, number 9152, December.
    3. World Bank, 2023. "Iran Poverty Diagnostic," World Bank Publications - Reports 40713, The World Bank Group.
    4. Ali Enami & Nora Lustig, 2018. "Inflation and the Erosion of the Poverty Reduction Impact of Iran's Universal Cash Transfer," Commitment to Equity (CEQ) Working Paper Series 68, Tulane University, Department of Economics.
    5. Auktor, Georgeta Vidican & Loewe, Markus, 2021. "Subsidy reforms in the Middle East and North Africa: Strategic options and their consequences for the social contract," IDOS Discussion Papers 12/2021, German Institute of Development and Sustainability (IDOS).
    6. Ali Enami, 2016. "Measuring the Effectiveness of Taxes and transfers in Fighting Poverty and Inequality in Iran," Commitment to Equity (CEQ) Working Paper Series 1358, Tulane University, Department of Economics.
    7. Etemadi, Manal & Gorji, Hasan Abolghasem & Kangarani, Hannaneh Mohammadi & Ashtarian, Kioomars, 2017. "Power structure among the actors of financial support to the poor to access health services: Social network analysis approach," Social Science & Medicine, Elsevier, vol. 195(C), pages 1-11.
    8. Georgeta Vidican Auktor & Markus Loewe, 2022. "Subsidy Reform and the Transformation of Social Contracts: The Cases of Egypt, Iran and Morocco," Social Sciences, MDPI, vol. 11(2), pages 1-22, February.
    9. Ali Enami, 2016. "An Application of the CEQ Effectiveness Indicators: The Case of Iran," Commitment to Equity (CEQ) Working Paper Series 58, Tulane University, Department of Economics.
    10. S. Mauricio Medinaceli Monrroy & Marcelo G. Velázquez Bilbao La Vieja, 2023. "Hydrocarbon Prices and Subsidies in Bolivia 1986 - 2025," Development Research Working Paper Series 05/2023, Institute for Advanced Development Studies.
    11. Nora Lustig, 2017. "Fiscal Policy, Income Redistribution and Poverty Reduction in Low and Middle Income Countries," Commitment to Equity (CEQ) Working Paper Series 1354, Tulane University, Department of Economics.
    12. Sally Torbert, 2022. "Impact Of Taxes And Transfers On Inequality In The Asia-Pacific Region," Asia-Pacific Sustainable Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 29(1), pages 43-65, May.
    13. Behrouz Sadeghi Amroabadi & Seyed Amin Mansouri & Mohammad Ali Ahmadi, 2024. "Investigating The Factors Affecting The Income Distribution On The Afghan Economy With Emphasis On Taxes," Journal of Academic Research in Economics, Spiru Haret University, Faculty of Accounting and Financial Management Constanta, vol. 16(2 (July)), pages 312-332.
    14. Vanesa Jorda & Jose M. Alonso, 2020. "What works to mitigate and reduce relative (and absolute) inequality?: A systematic review," WIDER Working Paper Series wp-2020-152, World Institute for Development Economic Research (UNU-WIDER).

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    More about this item

    Keywords

    : Incidence analysis; marginal contribution; effectiveness; energy subsidy reform; Iran.;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • 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

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