South Africa’s Economic Reconstruction and Recovery Plan was launched in October 2020 by the Presidency in response to the economic impacts of the Covid-19 pandemic. Besides the Presidential Employment Stimulus program, it included emergency social protection measures, among which the introduction of a special Covid-19 Social Relief of Distress grant (SRD), providing ZAR350 per month for unemployed people not covered by any other form of support. The South African government now seeks to develop options for the future of SRD grant.

Find out more about the Extension in South Africa

The objective of this research project is to produce motivated recommendations on how the SRD should be designed going forward into the longer term, in order to maximize the impact of the grant on employment outcomes and to ensure it effectively reduces poverty, while maintaining its cost to an acceptable level:

1. To maximise the impact of the grant on employment, the project needs to understand how to design and label the grant to encourage its use for job search.
2. To ensure the grant effectively reduces poverty, the project must figure out the most cost-effective way to target and assess the eligibility of recipients. Moreover, poverty reductions can be scaled up by determining measures that could encourage take up among the most disadvantaged. 

Once these goals have been achieved, and in order to inform public decision-making, these findings must be communicated to a number of stakeholders in government and civil society.

This project is part of a wider research program conducted with several South African research centres and in close collaboration with the South African Presidency. Four other research projects analysing the externalities of the Covid-19 stimulus policy are currently being developed as part of the first pillar of the Extension's activities in South Africa.

This research project uses the model generated to conduct the 2014/2015 fiscal incidence assessment and introduces updated data for 2019-2021. It simulates five scenarios around eligibility criteria, targeting mechanisms, value, disbursement model and conditionalities and computes the potential impact on poverty and employment outcomes.

You will find below the research paper related to this project: 

• Proposal for the extension, redesign and repurposing of the SRD for the goal of poverty reduction

It is worth noting that another paper has been published on the implications of the SRD grant, funded by AFD outside the Research Facility on Inequalities: Systemic exclusion from a South African social assistance transfer (February 2024)

Research has already shown that some population groups have been harder hit by Covid-19 than others and that the pandemic exacerbated existing inequalities in many areas, including health, education, work, and gender.

In this context, inequality has become a central issue for governments willing to fight the effects of the pandemic and to better prepare for future shocks. In April 2020, the Togolese government set up a cash transfer program called "Novissi", with the financial contribution of AFD, to support any eligible Togolese citizen who lost his or her income due to the adoption of the response measures against Covid-19. 

Studies using updated data and capturing the potential effects of the Covid-19 pandemic on income inequality and poverty in Togo are relatively scarce. This research project aims to fill the gap in academic literature by analyzing the impacts of Covid-19 on inequality in Togo, and evaluating the effects of the Togolese social policy « Novissi » on mitigating the impact of Covid-19 on inequality.

Using rich microeconomic data from a survey conducted by Togo's Institut National de la Statistique et des Études Économiques et Démographiques (INSEED) aimed at analysing the impact of the Covid-19 pandemic, the research team will estimate an econometric model based on the model developed by Dang and Nguyen (2021).

Due to methodological limitations and data availability constraints, this project did not lead to a publication. Further information is available upon request.

Despite several efforts to promote pro-poor growth, South Africa remains one of the most unequal countries in the world. While the country's colonial history and apartheid are known to have contributed to this inequality level, the nature and dynamics of its impact on society are yet to be fully understood.

Literature suggests that better institutions and lower level of inequality improve subjective wellbeing. However, evidence that examine how the interaction between these two variables explain variation in wellbeing is relatively scarce. This study will thus contribute to a deeper understanding of inequalities in South Africa. 

This research project has two main objectives:

1. Explore how variations in governance (such as audit outcomes) across South Africa's district municipalities explain the variation in the well-being of individuals.
2. Investigate how the interaction between the variation in governance across local government municipalities and inequality among individuals explains variation in subjective well-being.

To investigate the interactions between the quality of institutions and of the governance, the level of spatial inequality and the subjective wellbeing, researchers will use the National Income Dynamics Study (NIDS), a nationally representative survey of individuals across South Africa, which is repeated over five waves between 2008 and 2017. They will also use audit outcomes of local municipalities to proxy for the quality of governance.

You will find below the research paper related to this project:

• Spatial Inequality, Sub-regional governance and Subjective Well-being - The case of South Africa

Many of the measures on quantifying progress by countries towards reducing income inequality have focused on indices that measure trends in inequality over time (Gini coefficient for example) and compare countries without considering the differences between their socioeconomic structures.

However, these indices do not paint the complete picture about how countries are performing, especially when compared to one other in achieving Sustainable Development Goals and what policies and investments may be needed to support them. This research project will provide an alternative measurement of income inequality by taking into account the developing countries’ structural or predetermined conditions (mineral assets, type of institutions etc.) in assessing their progress towards reducing inequality and the impacts of climate change. 

The project focuses on the following objectives: 

1. Firstly, it will compare each country with its potential to reduce income inequalities by measuring the scope for improvement for each country at every year. This will allow a better understanding of the key factors that hinder a country’s effort and performance in reducing inequalities and of the policy and investments that are needed to tackle inequalities more efficiently.
2. Secondly, it will investigate how climate – temperature, precipitation and extreme weather events– influence the efficiency of countries in combining inputs to reduce inequality.
3. Thirdly, it will look at adaptation or intensification effects across regions, particularly in LDCs and SIDS and will identify the needed scale of investments.

Building on a panel database on 145 countries, including countries from Least Developed Countries (LDCs) and Small Island Developing States (SIDS) from 2000-2020, the project will use a stochastic frontier approach, an economic modelling technique, to estimate feasible frontiers for income inequality for each country and year.

You will find below the research paper related to this project:

• Reducing Inequalities Despite Climate change? Rethinking Progress Towards Reducing Income Inequalities and the Impact of Climate Change in Developing Countries

This research project proposes to estimate the distributive effect of gasoline taxes using a fiscal incidence considering these effects in the context of Mexico´s fiscal system, including the principal tax and spending instruments. 

In 2014, Mexico’s Finance Ministry (SHCP) introduced a special tax (IEPS) on carbon as a green tax aimed at reducing the green gas emission associated with fossil fuels, mainly gasoline and diesel. However, the tax revenue (4699 million pesos in 2014) and the environmental impact of this tax are marginal: in the past decade, until 2014, this tax had a negative value, thus working as a subsidy. Since that year, it became a tax, which has grown significantly in recent years, representing close to 300 billion pesos in 2019 and 2020. This is therefore in effect by far the most important green tax implemented in Mexico today. 

This analysis is of particular interest for Mexico at present because the transition from fuel subsidies to fuel taxes represents in effect the principal tax reform implemented in Mexico over the last decade in terms of both tax revenue (from -300 to +300 billion pesos in tax revenue) and distribution. Gasoline taxes have significant impacts on all the population, both directly on middle- and higher-income households through private transport, but especially indirectly for lower income households through public transport and transport costs for all goods and services, notably food. Preliminary analysis at the Fiscal Policy Equity Lab (FPEL) reveals that the increase in the indirect tax burden for the poor associated to gasoline taxes may reverse the effect poverty-reduction effect of direct transfers, even after their recent expansion. 

Quantifying these impacts precisely will allow the design of compensatory instruments to protect the poorest and most vulnerable groups from the regressive effects of these taxes. 

Find out more about the Extension in Mexico

This project is a joint undertaking between RIBOS, CEQ Institute and LNPP. It seeks to estimate the effect of green taxes in the context of the overall Mexican tax system through the international methodology developed by the Commitment to Equity Institute (CEQI), using INEGI data from the Encuesta de Ingresos y Gastos de los Hogares (ENIGH) for 2014-2020, among other data sources. 

This methodology will allow an estimation the effect of green taxes in the context of the overall fiscal system. This methodology facilitates comparability in time and space, and generates a wide variety of incidence indicators, including effects on the income Gini coefficient as well as income poverty using national and international poverty lines. 

This project ultimately aims to provide Mexican policy makers and stakeholders with timely analyses of the effects of tax policies on inequality and poverty. The research conducted will therefore result in: 

• a research paper,
• a policy brief whose analysis is based on the collaborative intelligence technique. Two sessions in which the model calibration and hypotheses will be discussed following the collaborative modeling framework. Participants in the sessions will be members of the expert network and key tax policy makers.

You will find below the research paper related to this project:

• Distributive impact of green taxes in Mexico (July 2024)

The policy brief related to this project will be published here soon.