Analyzing the Distributive Effects of Fiscal Policies
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and limitations of the instruments used to generate such results. That section is followed by a systematic discussion of analytical alternatives and their empirical and operational implications in facing the knowledge demands of a new crisis. The fourth section proposes the use of two specific analytical instruments in preparing for the next crisis: (1) a questionnaire on the fiscal decisions made at the sectoral and intrasectoral levels and (2) ex ante microsimulations of the equity of opportunities-related impacts of fiscal policies as a complement to the traditional (output) indicators of welfare (such as income, expenditure, or wealth). These analytical tools are illustrated in the case of Liberia. The final section presents our conclusions.
Literature Review What We Know about the Distributive Effects of Fiscal Policies during Crises The relatively little time elapsed since the onset of the recent global crisis, the scarcity of good disaggregated data, and the unavailability of appropriate analytical tools have limited the number of studies that directly address the impact of the crisis on poor people and throughout the income distribution. Nevertheless, a series of papers directly or indirectly sheds some light on this issue. Several cross-country aggregate analyses have been conducted on the impact of the global crisis on poverty and income distribution. Chen and Ravallion (2009)3 estimate that the crisis may have added 53 million people to the 2009 count of people living on less than US$1.25 a day and 64 million people to the number living on less than US$2.00 a day. This means that the global poverty rate would have fallen from 42 percent to 39 percent in 2009, whereas the precrisis trajectory would have brought the poverty rate down to 38 percent. Wan and Francisco (2009) find that the crisis adversely affected poverty reduction, although it should not be expected to lead into an increase in poverty because most developing countries in Asia increased social expenditures in 2009—even in a context of reduced GDP growth. The International Monetary Fund (IMF) finds that, compared with developed countries, the LICs have been weathering the global crisis rather well (IMF 2010a). Real per capita gross domestic product (GDP) growth has stayed positive in two-thirds of LICs—very much in contrast to the experiences of these countries in previous global crises. The big difference for LICs this time has been the active countercyclical policies