Publication: Latin America and the Social Contract : Patterns of Social Spending and Taxation
Date
2008-04
ISSN
Published
2008-04
Author(s)
Abstract
This paper presents an incidence
analysis of both social spending and taxation for seven
Latin American countries, the United Kingdom, and the United
States. The analysis shows that Latin American countries are
headed de facto toward a minimalist welfare state similar to
the one in the United States, rather than toward a stronger,
European-like welfare state. Specifically, both in Latin
America and in the United States, social spending remains
fairly flat across income quintiles. On the taxation side,
high income inequality causes the rich to bear most of the
taxation burden. This causes a vicious cycle where the rich
oppose the expansion of the welfare state (as they bear most
of its burden without receiving much back), which in turn
maintains long-term inequalities. The recent increased
socioeconomic instability in many Latin American countries
shows nonetheless a real need for a stronger welfare state,
which, if unanswered, may degenerate into short-term and
unsustainable policies. The case of Chile suggests that a
way out from this apparent dead end can be found, as elites
may be willing to raise their contribution to social
spending if this can lead to a more stable social contract.
Citation
“Breceda, Karla; Rigolini, Jamele; Saavedra, Jaime. 2008. Latin America and the Social Contract : Patterns of Social Spending and Taxation. Policy Research Working Paper No. 4604. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/b8579089-f630-5824-9f86-53dd36675d7b License: CC BY 3.0 IGO.”
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