The Impact of Fiscal Policy on Inequality and Poverty in Zambia

De La Fuente, Alejandro ; Rosales, Manuel ; Jellema, Jon

World Bank, Washington, DC

关键词: FISCAL POLICY;    INEQUALITY;    INCOME INEQUALITY;    POVERTY;    SOCIAL ASSISTANCE;   

DOI  :  10.1596/1813-9450-8246
RP-ID  :  WPS8246

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This study assesses the redistributiveimpact of fiscal policy––and its individual elements––inZambia. Zambia's 2015 fiscal policy reduces inequality;the largest reduction is created by in-kind public serviceexpenditures on education. However, fiscal policy alsoincreases poverty in three ways: (1) there is a relativelylow level of targeted, direct-transfer spending; (2) energysubsidies, which do not reach many poor households, absorb alarge share of expenditures; and (3) tax instruments createa burden greater than what is received as direct or indirectbenefits from subsidies or direct transfers. The number ofpoor and vulnerable individuals who experience net cashsubtractions from their incomes is greater than the numberof poor and vulnerable individuals who experience netadditions. Eliminating subsidy spending while compensatingpoor households would help fiscal policy achieve povertyreduction and even greater inequality reduction. Ifsubsidies on fuel, electricity, and agricultural inputs wereeliminated without any compensatory mechanism, such as anincrease in the Social Cash Transfer program's coverageand benefit levels, the impact of fiscal policy on povertywould likely be muted. In 2015, Zambia exempted over 80percent of the average household's consumption basket.However, value-added tax exemptions imply only that someportion of value-added is not taxed, and so do not entirelyeliminate a value-added tax burden. A more efficient way todeliver net benefits to poor and vulnerable households isthrough targeted cash transfers at a scale large enough tocompensate for the burden created across households byvalue-added tax and other indirect taxes.