• Inequality pre- and post taxes and transfers in Paraguay


    I just love the following figure, which basically shows that in Paraguay, in sharp contrast with other countries in Latin America, taxes and transfers fail to improve the situation of the poor and to lower inequality (compare for example with what Brazil, Uruguay or Argentina are achieving with redistribution). This is from the paper “Social Spending, Taxes, and Income Redistribution in Paraguay“, by Sean Higgins, Nora Lustig, Julio Ramirez, and Billy Swanson

    The table shows us that a significant number of the near-poor pay enough direct taxes to make them poor, as the headcount index for net market income using the $4 PPP per day poverty line, at 28.3%, is over one percentage point higher than the market income headcount index. This is also unique to Paraguay among countries in our sample: the others have much smaller increases in poverty caused by direct taxes. Direct transfers reduce poverty slightly, but their impact is overshadowed by the poverty-increasing impact of direct and indirect taxes: post-fiscal income poverty is higher than market income poverty using both the $2.50 and $4 PPP per day poverty lines.









    In my view, this is the main challenge of social policies in Paraguay.

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