Between 2007 and 2009, social spending in Bolivia increased from 11.5 to 14.7 percent of GDP, while primary spending in the general government increased from 29.2 to 33.3 percent of GDP. Approximately 79 percent of the primary spending increase with respect to GDP came from social spending.
How much redistribution and poverty reduction can be attributed to social spending and taxation policies? We answered this question using data from the 2009 Household Survey (Encuesta de Hogares, or EH) collected by the Bolivian National Institute of Statistics (Instituto Nacional de Estadistica, or INE).1 Income categories used in the incidence analysis are constructed based on those outlined by Lustig and Higgins (2013).
Our main findings show a low redistributive impact of fiscal policy, mainly due to the presence of significant leakages in transfers to the non-poor and to the small size of per beneficiary transfers. The impact of fiscal policy on poverty and income inequality could increase with better targeting to the poor, larger per capita benefits, and an increase in coverage and progressivity of the tax system.