Fiscal Policy and Inclusive Growth in Latin America: Lessons for Asia

Abstract

Broadly speaking, developing Asia and Latin America are at similar income and development levels. Relative to the advanced economies, economic growth and development are much more urgent priorities for both, yet Latin America has significantly more experience in using fiscal policy to tackle inequality and to promote inclusive growth. Therefore, its greater experience with inclusive fiscal policy can offer valuable lessons for developing Asia in its new-found quest to leverage public spending and taxation to spread the benefits of growth to the broader population. While the Latin American experience has general implications for Asia, of particular interest is its generally successful experience with conditional cash transfer (CCT) programs. Overall, the evidence suggests that CCT programs can be an effective tool for inclusive growth in Asia, too. However, CCTs are not a panacea for poverty and inequality, and the ingredients for their success in Asia may differ from those in Latin America.