Designing Fiscal Redistribution: The Role of Universal and Targeted Transfers

28 Pages Posted: 23 Jul 2020

See all articles by David Coady

David Coady

Government of the United Kingdom - City Hospitals Sunderland

Nghia-Piotr Le

International Monetary Fund (IMF)

Date Written: June 1, 2020

Abstract

There is a growing debate on the relative merits of universal and targeted social assistancetransfers in achieving income redistribution objectives. While the benefits of targeting areclear, i.e., a larger poverty impact for a given transfer budget or lower fiscal cost for a givenpoverty impact, in practice targeting also comes with various costs, including incentive,administrative, social and political costs. The appropriate balance between targeted anduniversal transfers will therefore depend on how countries decide to trade-off these costs andbenefits as well as on the potential for redistribution through taxes. This paper discusses thetrade-offs that arise in different country contexts and the potential for strengthening fiscalredistribution in advanced and developing countries, including through expanding transfercoverage and progressive tax financing.

JEL Classification: D30, H21, E52, H53, E01, K34, H71, H2, Z13

Suggested Citation

Coady, David and Le, Nghia-Piotr, Designing Fiscal Redistribution: The Role of Universal and Targeted Transfers (June 1, 2020). IMF Working Paper No. 20/105, Available at SSRN: https://ssrn.com/abstract=3652494

David Coady (Contact Author)

Government of the United Kingdom - City Hospitals Sunderland

Sunderland
United Kingdom

Nghia-Piotr Le

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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