Inequality and Social Welfare

2.2 Inequality Measures and Decompositions ............................................................................................... 78 2.2.1 Inequality measures and the extended Gini..................................................................................... 78 2.2.2 Source decomposition of the Gini and the Gini income elasticity................................................. 80 2.2.3 Application to income and consumption inequality in Mexico .................................................... 82 2.3 Policy Applications of the Source Decomposition .................................................................................. 85 2.3.1 Simulations per dollar spent: Transfers in the Czech Republic..................................................... 86 2.3.2 Simulations with percentage changes: The VAT in South Africa ................................................. 86 2.3.3 Combining taxes and transfers: Unemployment benefits in Chile ............................................... 87 2.3.4 Beyond taxes and transfers: Basic infrastructure in Honduras ..................................................... 89 2.4 Extensions to the Source Decomposition Methodology ......................................................................... 90 2.4.1 Robustness test with the extended Gini............................................................................................ 90 2.4.2 Targeting versus allocation among program beneficiaries ............................................................ 91 2.4.3 Impact of programs and policies on the poor and the nonpoor.................................................... 93 2.5 Impact of Policies on Growth and Cost of Taxation ............................................................................... 95 2.5.1 From inequality to social welfare: Growth and redistribution...................................................... 95 2.5.2 Financing programs and policies: The marginal efficiency cost of funds .................................... 97 2.6 Conclusion .................................................................................................................................................... 99 2.6.1 Advantages of the framework presented in this chapter ............................................................... 99 2.6.2 Limitations of the framework........................................................................................................... 100 2.6.3 Flexibility to emphasize the poor..................................................................................................... 101 Notes........................................................................................................................................................................ 102 Bibliography and References................................................................................................................................ 103