Abstract
This paper proposes a methodology for testing for whether tax reforms are pro-poor. This is done by extending stochastic dominance techniques to identify tax reforms that will be deemed absolutely or relatively pro-poor by a wide spectrum of poverty analysts. The statistical properties of the various estimators are also derived in order to make the method implementable using survey data. The methodology is used to assess the pro-poorness of possible reforms to Mexicoβs indirect tax system. This leads to the identification of several possible pro-poor tax reforms in that country. It also shows how the pro-poorness of a tax reform depends on oneβs conception of poverty as well as on the revenue and efficiency impact of the reform.
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