Publication: Fiscal Incidence on the Island: Grenada’s Fiscal System and Its Incidence
Loading...
Date
2024-01-29
ISSN
Published
2024-01-29
Editor(s)
Abstract
This paper examines the distributional effects of fiscal policy in Grenada. Using data from the 2017–18 Living Conditions and Household Budgets Survey and following the Commitment to Equity analysis framework, the paper estimates the effects of fiscal policy interventions on inequality and poverty. It analyzes the distributional incidence of direct and indirect taxes, direct transfers provided by social transfers and school feeding programs, and in-kind transfers generated by public services in health and education. The results show that Grenada has a tax system that is neutral on the value-added tax side and progressive on the personal income tax side. Furthermore, direct transfers make a modest contribution to poverty reduction and are almost neutral in their distributive impact. The results contribute to the understanding of who bears the burden of taxation and benefits from transfers and of how Grenada’s fiscal system can improve its redistributive effect.
Link to Data Set
Citation
“Canavire Bacarreza, Gustavo; Gómez Aliaga, Guillermo; Britton, Chevanne; Rios-Avila, Fernando; Jimenez Pozo, Wilson; Granados Ibarra, Silvia; Li, Ran. 2024. Fiscal Incidence on the Island: Grenada’s Fiscal System and Its Incidence. Policy Research Working Paper; 10678. © World Bank. http://hdl.handle.net/10986/40973 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication Geopolitics and the World Trading System(Washington, DC: World Bank, 2024-12-23)Until the beginning of this century, the GATT/WTO system worked. Economic research provided a compelling explanation. It showed that if governments maximize the well-being of their own countries broadly defined, GATT/WTO principles would facilitate mutually beneficial cooperation over their trade policy choices. Now heightened geopolitical rivalry seems to have undermined the WTO. A simple transposition of the previous rationalization suggests that geopolitics and trade cooperation are not compatible. The paper shows that this is only true if rivalry eclipses any consideration of own-country well-being. In all other circumstances, there are gains from trade cooperation even with geopolitics. Furthermore, the WTO’s relevance is in question only if it adheres too rigidly to its existing rules and norms. Through measured adaptation to the geopolitical imperative, the WTO can continue to thrive as a forum for multilateral trade cooperation in the age of geopolitics.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Global Poverty Revisited Using 2021 PPPs and New Data on Consumption(Washington, DC: World Bank, 2025-06-05)Recent improvements in survey methodologies have increased measured consumption in many low- and lower-middle-income countries that now collect a more comprehensive measure of household consumption. Faced with such methodological changes, countries have frequently revised upward their national poverty lines to make them appropriate for the new measures of consumption. This in turn affects the World Bank’s global poverty lines when they are periodically revised. The international poverty line, which is based on the typical poverty line in low-income countries, increases by around 40 percent to $3.00 when the more recent national poverty lines as well as the 2021 purchasing power parities are incorporated. The net impact of the changes in international prices, the poverty line, and new survey data (including new data for India) is an increase in global extreme poverty by some 125 million people in 2022, and a significant shift of poverty away from South Asia and toward Sub-Saharan Africa. The changes at higher poverty lines, which are more relevant to middle-income countries, are mixed.Publication Geopolitical Fragmentation and Friendshoring(Washington, DC: World Bank, 2025-06-26)This paper examines the relationship between geopolitical fragmentation and friendshoring of foreign investments over time, countries, and sectors. The analysis uses comprehensive data on foreign direct investments covering greenfield projects, mergers and acquisitions, and stocks of affiliates, as well as data on four alternative measures of geopolitical distance between countries. The gravity estimations suggest that, first, geopolitical differences have a negative effect on foreign investments and the magnitude has heightened in the post-pandemic period compared to a decade ago. Second, it is primarily the companies from advanced Western economies whose foreign investment decisions are increasingly shaped by friendshoring forces. Finally, the paper shows that friendshoring is not only confined to strategic industries, implying that allocations of foreign direct investments may not solely reflect national security or resilience considerations.Publication A Global Assessment of Domestic Petroleum Fuel Prices(Washington, DC: World Bank, 2025-06-26)Oil prices have been increasingly volatile since 2004. However, the impact of this volatility on domestic end-user prices differs significantly by fuel and country. Some countries fully pass through global price movements to domestic end-user prices, and some countries freeze domestic fuel prices for long periods of time. Fuel subsidies emerge or grow if domestic prices significantly diverge from international prices in times of rising international oil prices. This paper draws on two new databases developed by the author for the purposes of this paper to analyze the degree of pass-through of international price volatility onto domestic consumers for eight fuels between December 2017 and December 2023 for up to 125 economies, depending on the fuel. This period saw significant oil price volatility on account of events such as the COVID-19 pandemic and the war in Ukraine. The paper finds that domestic prices in many countries did not follow international fuel prices within the period analyzed. Countries with price controls had much lower levels of pass-through than those with price deregulation. Countries that adjusted their fuel prices at frequent intervals (weekly or monthly) had higher levels of price pass-through than those adjusting them quarterly or less frequently. Currency depreciation and the existence of an official fuel subsidy are associated with lower levels of price pass-through, and the impact of being a net crude oil or net refined fuel exporter is mixed. The results show that not tracking international prices closely is associated with higher incidences of fuel shortages, fuel smuggling, and fuel black marketing.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Recovering Income Distribution in the Presence of Interval-Censored Data(World Bank, Washington, DC, 2022-08)This paper proposes a method to analyze interval-censored data, using multiple imputation based on a heteroskedastic interval regression approach. The proposed model aims to obtain a synthetic data set that can be used for standard analysis, including standard linear regression, quantile regression, or poverty and inequality estimation. The paper presents two applications to show the performance of the method. First, it runs a Monte Carlo simulation to show the method's performance under the assumption of multiplicative heteroskedasticity, with and without conditional normality. Second, it uses the proposed methodology to analyze labor income data in Grenada for 2013–20, where the salary data are interval-censored according to the salary intervals prespecified in the survey questionnaire. The results obtained are consistent across both exercises.Publication Will Elders Provide for Their Grandchildren?(World Bank, Washington, DC, 2017-08)This paper takes advantage of repeated cross-section household surveys and a sharp discontinuity created by the introduction of an unconditional cash transfer to elders. The paper evaluates the impact of these cash transfers on the educational expenditures for children within a household. The analysis finds positive and significant effects of the program at the aggregate level. It also finds that the program has stronger effects in indigenous populations and among female and rural populations. The results are robust with respect to a series of falsification tests, survey structures, model specifications, and estimation methods.Publication Fiscal Incidence in Ukraine(World Bank, Washington, DC, 2019-03)The paper employs the Commitment to Equity framework to present a first attempt at a comprehensive fiscal incidence analysis for Ukraine, encompassing the revenue and expenditures components of the fiscal system, including direct and indirect taxes, as well as direct, indirect, and in-kind transfers. The fiscal system in Ukraine has high redistribution effects, decreasing the Gini inequality index by 21 percentage points, and the official measure of poverty incidence by 27.6 percentage points (considering all fiscal interventions including in-kind transfers). As in many other countries in the region, pensions are the main contributor to the redistribution effect of fiscal policy. However, Ukraine stands out due to the relatively high equalizing effect of direct transfers. Fiscal policy in Ukraine is pro-poor, with the lowest income decile benefiting the most. Overall, 60 percent of the population of Ukraine are net recipients from the fiscal system, the main categories of recipients being households with two or more children, single-parent households, and retirees.Publication Social Spending, Distribution, and Equality of Opportunities : Opportunity Incidence Analysis(World Bank, Washington, DC, 2013-06)Existing evidence forms a body of "conventional wisdom" on the redistributive impact of fiscal policies that has been recently questioned by more disaggregated analyses. This paper proposes an additional extension to the traditional benefit incidence analysis to explore further the extent to which the conventional wisdom holds, as well as to provide effective guidance in fiscal decision making. The benefit incidence analysis extension includes linking fiscal policies with the concept of equality of opportunities. The paper describes this approach and showcases the application of the proposed "opportunity incidence analysis" to six pilot countries: Liberia, Cote d Ivoire, Zambia, Tajikistan, Thailand, and Paraguay. Three main contributions stand out: first, opportunity incidence analysis complements traditional benefit incidence analysis by applying its mechanics to a more forward looking concept of equal opportunity. Second, opportunities can be used to target public spending with higher precision. Third, micro-simulations can be used to understand the cost-effectiveness of alternative spending interventions that seek to improve equality of opportunities. All of these results complement the diagnosis produced by traditional incidence analysis and provide useful information to guide specific policy decisions.Publication Equality of Opportunities and Fiscal Incidence in Cote d'Ivoire(World Bank, Washington, DC, 2012-04)This study analyzes opportunities for children in Cote d'Ivoire, where opportunities refer to access to basic services and goods that improve the likelihood of a child maximizing his or her human potential. The principle that guides this analysis is one of equality of opportunity, which is that a child's circumstances at birth should not determine his or her access to opportunities. The analysis computes the Human Opportunity Index, which measures the extent to which access to basic services is universal and evenly distributed among children of different circumstances. Opportunities are limited in Cote d'Ivoire, despite some improvements in access to electricity and timely access to primary education. Otherwise, trends on access remain stagnant. Scale effects (variations across the board) are behind these trends, with little improvement observed from equalizing interventions. Circumstances such as region and household head characteristics affect a child's access to opportunities, while household incomes and a child's gender and ethnicity play a relatively small role in access differentials. Public spending on education opportunities is shown to be regressive and pro-rich, especially when analyzed across the distribution of circumstances rather than acroos income level.The groups of children that are particularly behind in terms of educational opportunities are those whose household heads lack primary education and reside in rural areas. Closing the enrollment gap of these children should be a priority for targeted educational interventions. However, improving opportunities may require more than a single type of intervention: opportunities with low coverage may need to be scaled up, while those with large inequalities of access may require equalizing interventions.
Users also downloaded
Showing related downloaded files
Publication Subnational Business Ready in the European Union 2024: Bulgaria(World Bank, Washington DC, 2024-11-06)This year, the Subnational B-READY series cover 40 cities in six EU Member States—Bulgaria, Croatia, Hungary, Portugal, Romania, and the Slovak Republic—covering 36 European regions. In Bulgaria, the Subnational B-READY covers six cities in six regions at the NUTS2 level: Burgas (Southeastern), Pleven (Northwestern), Plovdiv (Southern Central), Ruse (Northern Central), Sofia (Southwestern), and Varna (Northeastern). The primary objective of the Subnational B-READY studies is to identify and address regional disparities in regulatory environments and to promote reforms that foster private sector growth, job creation, and sustainability. The Subnational B-READY series delivers a rigorous, data-driven analysis of business climates at the local level, offering actionable insights for policy makers.Publication Poverty, Prosperity, and Planet Report 2024(Washington, DC: World Bank, 2024-10-15)The Poverty, Prosperity, and Planet Report 2024 is the latest edition of the series formerly known as Poverty and Shared Prosperity. The report emphasizes that reducing poverty and increasing shared prosperity must be achieved in ways that do not come at unacceptably high costs to the environment. The current “polycrisis”—where the multiple crises of slow economic growth, increased fragility, climate risks, and heightened uncertainty have come together at the same time—makes national development strategies and international cooperation difficult. Offering the first post-Coronavirus (COVID)-19 pandemic assessment of global progress on this interlinked agenda, the report finds that global poverty reduction has resumed but at a pace slower than before the COVID-19 crisis. Nearly 700 million people worldwide live in extreme poverty with less than US$2.15 per person per day. Progress has essentially plateaued amid lower economic growth and the impacts of COVID-19 and other crises. Today, extreme poverty is concentrated mostly in Sub-Saharan Africa and fragile settings. At a higher standard more typical of upper-middle-income countries—US$6.85 per person per day—almost one-half of the world is living in poverty. The report also provides evidence that the number of countries that have high levels of income inequality has declined considerably during the past two decades, but the pace of improvements in shared prosperity has slowed, and that inequality remains high in Latin America and the Caribbean and Sub-Saharan Africa. Worldwide, people’s incomes today would need to increase fivefold on average to reach a minimum prosperity threshold of US$25 per person per day. Where there has been progress in poverty reduction and shared prosperity, there is evidence of an increasing ability of countries to manage natural hazards, but climate risks are significantly higher in the poorest settings. Nearly one in five people globally is at risk of experiencing welfare losses due to an extreme weather event from which they will struggle to recover. The interconnected issues of climate change and poverty call for a united and inclusive effort from the global community. Development cooperation stakeholders—from governments, nongovernmental organizations, and the private sector to communities and citizens acting locally in every corner of the globe—hold pivotal roles in promoting fair and sustainable transitions. By emphasizing strategies that yield multiple benefits and diligently monitoring and addressing trade-offs, we can strive toward a future that is prosperous, equitable, and resilient.Publication World Bank Annual Report 2024(Washington, DC: World Bank, 2024-10-25)This annual report, which covers the period from July 1, 2023, to June 30, 2024, has been prepared by the Executive Directors of both the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA)—collectively known as the World Bank—in accordance with the respective bylaws of the two institutions. Ajay Banga, President of the World Bank Group and Chairman of the Board of Executive Directors, has submitted this report, together with the accompanying administrative budgets and audited financial statements, to the Board of Governors.Publication Tanzania Country Climate and Development Report(Washington, DC: World Bank Group, 2024-12-12)The Country Climate and Development Report (CCDR) for Tanzania identifies the impact of climate change on the country’s economy. The CCDR uses macroeconomic, climate, sectoral, institutional, and financial models to identify the economy’s exposure to climate risks and the opportunities to integrate climate action and development. High poverty levels and dependence on rainfed, low-productivity agriculture leaves Tanzania’s economy vulnerable to climate risks. By 2050, climate change could push an additional 2.6 million people in poverty and force up to 13 million Tanzanians to migrate internally. The CCDR presents how implementation of three multisectoral intervention areas could generate climate-positive, resilient, and inclusive growth in Tanzania by 2050. These are: integrating climate considerations when strengthening human capital and social protection; optimizing land and water use and management to boost agriculture and rural productivity, augment climate resilience, and lower greenhouses gas emissions; and prioritizing resilient and low-carbon transport, energy and digital infrastructure systems in urban areas and different sectors. The CCDR details governance arrangements for effective climate change action, presents investment needs, and describes options for mobilizing financing. Action is needed both to reduce vulnerabilities of Tanzania’s current economy and realize the country’s Vision 2050 goal of a more inclusive and sustainable growth trajectory. Targeted climate action could boost private investment and job creation, enabling Tanzania to meet its development objectives in the face of global risks. Technical background reports prepared for the CCDR are available upon request.Publication Global Economic Prospects, January 2025(Washington, DC: World Bank, 2025-01-16)Global growth is expected to hold steady at 2.7 percent in 2025-26. However, the global economy appears to be settling at a low growth rate that will be insufficient to foster sustained economic development—with the possibility of further headwinds from heightened policy uncertainty and adverse trade policy shifts, geopolitical tensions, persistent inflation, and climate-related natural disasters. Against this backdrop, emerging market and developing economies are set to enter the second quarter of the twenty-first century with per capita incomes on a trajectory that implies substantially slower catch-up toward advanced-economy living standards than they previously experienced. Without course corrections, most low-income countries are unlikely to graduate to middle-income status by the middle of the century. Policy action at both global and national levels is needed to foster a more favorable external environment, enhance macroeconomic stability, reduce structural constraints, address the effects of climate change, and thus accelerate long-term growth and development.