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Designing Fiscal Redistribution: The Role of Universal and Targeted Transfers
Author:
Mr. David Coady
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and
Nghia-Piotr Le null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2020: Issue 105
Language:
English
Publication Date:
26 Jun 2020
DOI:
https://doi.org/10.5089/9781513547046.001
ISBN:
9781513547046
ISSN:
1018-5941
Pages:
27
Keywords:
WP; income; cost; earned income; taxation framework; consumption taxation; transfer program; income tax schedule; efficiency cost; poverty impact; redistribution objective; means testing; income share; public spending; income redistribution objective; progressive tax; poverty line; Personal income; Income tax systems; Fiscal redistribution; Income inequality; Middle East; North Africa; Sub-Saharan Africa; Global; East Africa; transfers; taxes; targeted; universal; income transfer
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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.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund