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Poverty alleviation strategies - use of fiscal instruments and other public policies
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Poverty alleviation strategies - use of fiscal instruments and other public policies

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This presentation analyzes in a stylized fashion the use of fiscal instruments, particularly taxes, grants and subsidies, for the aim of reducing poverty. It is argued that the adequate use of these ...

This presentation analyzes in a stylized fashion the use of fiscal instruments, particularly taxes, grants and subsidies, for the aim of reducing poverty. It is argued that the adequate use of these instruments combined with other public policies for social equity and inclusion are conducive to poverty eradication.

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Poverty alleviation strategies - use of fiscal instruments and other public policies Poverty alleviation strategies - use of fiscal instruments and other public policies Presentation Transcript

  • POVERTY ALLEVIATION STRATEGIES IN URBAN AND RURAL AREAS:The use of fiscal instruments, public services and other policiesDr. Roberto VillarrealPaper presented at the Fourth International Seminar on Social Policies,organized by the Deutsche Gesellschaft für Technische Zuzamenarbeit (GTZ),the Konrad Adenauer Foundation and the Chinese Academy of SocialSciences, in Beijing, October 29-30, 2008.
  • CONTENTS• FRAMEWORK CONCEPTS• PRESENT CHALLENGES IN POVERTYALLEVIATION AND PUBLIC SERVICE DELIVERY• A VARIETY OF PROGRAMS AND INSTRUMENTS• CONCLUSSIONS2
  • INCOME INEQUALITY AND POVERTY• The personal distribution of income resultingfrom markets may be highly unequal– Due to individual, regional or other factors• And poverty may also be very extended• Fiscal policies may be designed to reduceinequality and poverty– By use of taxes, transfers and debt instruments– Yet, in practice this may find several limitations– Thus, a variety of policies may be needed; thisdeserves careful consideration– And, of course, pro-poor growth is fundamental3 View slide
  • DISTRIBUTIVE AND ANTI-POVERY FISCAL POLICIES:A SCHEMATIC PRESENTATONi=1, 2,…NYiINEQ0YNY1Yi , Yi-Tai , Yi-TAi+TRi , Yi-Tai+Tri+ITiP NPPLYDYSINEQTAINEQTA,TRNPTRINEQTA,TR,ITITR4 View slide
  • PRACTICAL ISSUES MAY LIMIT THEUSEFULNESS OF FISCAL POLICIES• Taxes– Difficulties to tax some types of income– Negative incentives (on work effort, capital investment, savings)– Political resistence– Administrative costs of the tax system (information, auditing, enforcement)• Transfers– Targetting the poor is difficult (identification and information problems)– Selecting transfer instruments is also a complex task (cash transfers, subsidies to diversegoods and services)– Positive and negative incentives are important (human capital accumulation, productiveeffort, gender issues, present versus future welfare, tangible versus intangible benefits,insurance)– Impacts on social cohesion– Administrative costs of the transfer system (information, management, delivery, corruption)• Debt– Intrinsic difficulties to achieve intergenerational equity (measurement, uncertainty)– Inadequate representation of future generations in political processes may lead to financialirresponsibilities– Signals from the public sector to financial markets• All these instruments are actually operated within a complex framework whosegovernance is challenging– Diverse government levels, diverse authorities within each level, convenience of socialparticipation5
  • PUBLIC POLICY: A SCIENCE AND AN ART6FISCAL BALANCEPUBLICADMINISTRATION**ECONOMICEFFICIENCYSOCIAL EQUITY**Including numerous aspects: regional, age, gender, ethnic, etc.** Considering administrative capacity, effectiveness and efficiency• It is about putting togetherdifferent elements in acoherent way•Each country struggles toachieve a satisfactory answer•Often, there are markedpolicy biases (ideological,bureaucratic struggles)• Success is reflected indevelopment: dynamic,inclussive, equitable, safe,sustainable
  • A HOLISTIC APPROACH7Better living conditionsBetter living conditionsAssets accumulationAssets accumulation Income growthIncome growthPermanent:Permanent:Safe, equitable,Safe, equitable,inclussive, and sustainableinclussive, and sustainableLESSENING SYNDROME:LESSENING SYNDROME: Low or poor living conditionsLow or poor living conditions Insufficient assets and incomeInsufficient assets and income Poverty, inequalityPoverty, inequality Vulnerability, marginalization,Vulnerability, marginalization,exclussion, inadequate policiesexclussion, inadequate policies• Economic and social processes are intimatelyinterrelated in development•Poverty and inequality are not just a result frominadequate distribution of assets and productivityproblems; they come also from from diverse socialprocesses embedded in society• This fact should not be overlooked by public policy:action on all fronts is necessary
  • FOR CONSIDERATIONPOVERTY– Productivity• Assets accumulation (human, physical, social, intellectual)• Rates of utilization• Rates of return• Local public goods– Movility– Vulnerability– Social inclussion– Marginalization– Adequate public policies• Social participation (communities, civil society organizations)• Good governance (levels of government, diverse authorities,international organizations)– Social cohesion8
  • CONTENTS• FRAMEWORK CONCEPTS• PRESENT CHALLENGES IN POVERTYALLEVIATION AND PUBLIC SERVICE DELIVERY• A VARIETY OF PROGRAMS AND INSTRUMENTS• CONCLUSSIONS9
  • SOME STATISTICS ON POVERTY• World Bank*: 1.4 billion people living under $1.25USD/day in developing countries in 2005 (vs. 1.9billion people in 1981)(+) Even though population increased in these 25 years A 1% yearly decrease in the proportion of extreme poor people relativeto total population, from 52% en 1981 to 26% in 2005 This is on track with the Millenium Development Goals established bythe United Nations (50% reduction of people in poverty between 1990and 2015)10* Ravaillon, M. and Sh. Chen (2008), “The developing world is poorer than we thought, but no less succesful in the fight against poverty”. With 1993 dataoriginal estimates were 985 million people living under $1 USD a day in 2004, down from 1.5 billion in 1991.** Dramatic progress in China: from 835 million peopleto 208 million (i.e., from 84% to 16% of Chinesepopulation, and from 44% to 15% of World population)**
  • (-) Poverty is larger than originally calculated (because cost ofliving was underestimated) Poverty reduction has been territorialy uneven Absolute declines have only occurred in East Asia and Pacific (due toimpressive results in China) Poverty reached many additional million people in other regions: 182 more millions in Sub-Saharan Africa 38 more in South Asia (most of them in India) 17 million more in Europe and Central Asia The number of poor has been constant in the Middle East and North Africa Latin America registered large transitory augments because of major macroeconomiccrisis, but has returned to pre-crisis levels This does not include increases in poverty occured between 2005 andtoday from very high raises in food and energy prices. By 2015 there will still be 1 billion people living under $1.25USD a day, and those that have crossed that internationalpoverty line will still be poor considering many other standards11
  • SOME STATISTICS ONACCESS TO PUBLIC SERVICES*• Access to safe water– The highest coverage for both urban and rural areas occurs in Eastern Europe andCentral Asia, where the gap is also the narrowest (95% and 82%, respectively, a 13percent points difference).– In the middle range are East Asia and Latin America, with similar coverage anddisparities in both regions (around 93% and 67%, thus a 26 percent points gap)– The lowest indicators are observed in Sub-Saharan Africa (83% and 44% , a 39 percentpoints disparity)• Access to sanitation– The highest urban and rural coverage and smallest disparities are in Eastern Europe andCentral Asia (91% and 81% , respectively, a gap of 10 percent points), followed by theMiddle East and North Africa in all indicators.– Latin America comes next (86%, 52%, and a 34 percent points gap), followed by EastAsia (73%, 35% and 38 percent points). In both regions, a marked urban bias is thusobserved.– Sub-Saharan Africa records low coverage rates in both areas but narrower disparities(73% and 43%, a 30 percent points gap)– The lowest coverage and widest disparities are found in South Asia (67% and 22% ofaccess in urban and rural areas, respectively, reflecting a gap of 45 percent points).12* According to the World Bank
  • IMPLICATIONS• The large extent of poverty and defficiencies in accessto public services reveal the huge magnitude of laggingpopulations, and marked inequalities, around theworld and in all major regions• This occurs at a time when mankind has reachedhistorical records in population, income, human capitaland technology• This is worrisome in several ways– On moral grounds, it challenges fundamental values– On social grounds, it weakens social cohesion– On economic grounds, it lowers credibility and supportabout policies– On political grounds, it risks conflicts 13
  • CONTENTS• FRAMEWORK CONCEPTS• PRESENT CHALLENGES IN POVERTYALLEVIATION AND PUBLIC SERVICE DELIVERY• A VARIETY OF PROGRAMS AND INSTRUMENTS• CONCLUSSIONS14
  • EXPAMPLES OF INTERNATIONAL BEST PRACTICES• PUBLIC FINANCE:– Chile: flat income tax (although lacking a decentralized place-basedexpenditure side)• CONDITIONAL TRANSFERS– Mexico: Progresa/Oportunidades, 3x1 for Migrants• PRODUCTIVE EFFORT:– Bangladesh: Grameen Bank– India: Operation Flood– Italy: Albergo Difusso– Germany: Technical education system• SOCIAL PROTECTION:– Portable individual accounts for basic healthcare and pension benefits• PUBLIC SERVICES:– For balaced deployment, Mexico: Suma con Habitat (marginalizedurban areas), Microregiones (marginalized rural areas)– For quality and monitoring, Finland (?) 15
  • URBAN – RURAL DISPARITIES• Income disparities– Capital (human, physical, intellectual)– Demand factors– Key issues: economic diversification; economies ofagglomeration; local public goods• Disparities in access to public services– Water, sanitation, electricity, transportation– Education, healthcare– Financing, commercial distribution– Key issues: Viable scale, distance, demographic density,mode of delivery, urban-rural linkages, governance16
  • CONTENTS• FRAMEWORK CONCEPTS• PRESENT CHALLENGES IN POVERTYALLEVIATION AND PUBLIC SERVICE DELIVERY• A VARIETY OF PROGRAMS AND INSTRUMENTS• CONCLUSSIONS17
  • A GUESS…18FISCAL BALANCEPUBLICADMINISTRATIONECONOMICEFFICIENCYSOCIAL EQUITY•ON TAXES:•A flat income tax as the fundamental means to financethe system• Complemented with some progressive elements toaddress extreme inequality (e.g., taxes on capital gains,inheritances, etc.)• ON TRANSFERS:• Balancing access to both private and public goods andservices• Conditional to human capital accumulation, productiveeffort, social cohesion and universal basic socialprotection• Concentrate national programs on key interventionsand decentralize to local governments other programs• ON DEBT• Incorporating intergenerational equity with prudence•ON GOVERNANCE:• A place-based approach, each government levelbenefiting from comparative advantages• Articulating inter-regional elements (infrastructure,regional cooperation, urbanization, urban-rurallinkages)•ON TARGETTING THE POOR:• A territorial approach considering several indicators(income, public services, etc.)All this, based on overall pro-poorgrowth strategies!
  • THANKSFor comments contact:Roberto.Villarreal-Gonda@Hotmail.comEND OF PRESENTATION 19