Reduction of inequality is one of the core Sustainable Development Goals (SDGs). One of the targets of SDG 10 is for income growth of a country’s poorest 40% to be higher than the national average. Reaching this objective requires setting up economic policies on public expenditures and taxes that will benefit the poorest people. At the same time, mobilizing tax revenue can play a key role in financing the SDGs, but it is important to understand under what conditions this higher level of tax revenue collection is reconcilable with the goal of reducing inequalities.
This project is part of the European Facility for a research program on Inequalities in Developing and Emerging Countries, which is coordinated by the AFD. Financed by the Development Cooperation Instrument of the European Union, this facility enables to implement 20 research projects over the 2017-2020 period, in partnership with donors and research centers from the South to the North.
This research project seeks to improve understanding of the relationship between income inequality and budget policies in developing countries. The study is divided into three parts:
- Investigation into the redistributive impact of taxes, transfers, and public expenditure in three countries of West Africa (Côte d’Ivoire, Mali, and Senegal). The analysis will try to answer the following questions:
- Who pays taxes, and who benefits from the transfers and public expenditures?
What is the overall impact of the tax and transfer systems on inequalities?
What tax instrument can mobilize revenues while reducing poverty and inequality?
- Study of the effect on inequalities from applying different types of taxes in the developing countries. Is the increase in tax revenues (measured by the ratio between revenue and GDP) linked to a reduction or an increase in inequalities? The relationship between the type of taxes levied and the change in inequalities within a country and between different countries will be studied in order to identify which taxes are progressive or regressive.
- Analysis of tax compliance behaviors in Africa, by identifying how the level of inequalities affects citizens’ attitude towards taxes.
This research project will use econometric quantitative studies based on household survey data and macro-economic data available on a large number of countries (Parts 2 and 3). Microsimulation tools will also be used (Part 1).
This project is carried out with the support of the European Union
The content of this project information sheet falls under the sole responsibility of the AFD and does not necessarily reflect the opinions of the European Union.