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Redistributive effects of fiscal policies in Mexico: Corrections for top income measurement problems
Author(s) -
Hlasny Vladimir
Publication year - 2021
Publication title -
latin american policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.195
H-Index - 4
eISSN - 2041-7373
pISSN - 2041-7365
DOI - 10.1111/lamp.12206
Subject(s) - taxable income , subsidy , economics , inequality , yield (engineering) , economic inequality , demographic economics , econometrics , income distribution , labour economics , mathematical analysis , materials science , mathematics , accounting , market economy , metallurgy
This article assesses the redistributive effects of fiscal instruments in Mexico in 2010–2014, correcting for top‐income measurement problems. Two correction methods are applied—survey‐sample reweighting for households' nonresponse probability and replacing of top incomes using smooth Pareto distributions—to reestimate the effects of pensions, transfers, taxes, and subsidies. These corrections yield higher inequality measures, consistent between the reweighting and replacing methods. Taxable income shows the highest inequality and undergoes the highest upward correction for top‐income problems, whereas nontaxable income is strongly equalizing. Contributory pensions are inequality‐neutral, while transfers, taxes, and subsidies are equalizing. In‐kind transfers, cash‐like transfers, and direct taxes have the strongest equalizing effects. Top‐income measurement challenges retain their magnitude across years 2010, 2012, and 2014, but household nonresponse becomes more positively selected, causing greater biases in later years.