Standard tax and benefit incidence analysis is used to estimate the effects of fiscal policy on poverty and inequality in Peru. Results suggest that the extent of inequality and poverty reduction induced by Peru's fiscal policy is small. Results also suggest that the small impact is associated with low social spending rather than with inefficient spending. Most social spending components are progressive and overall social spending is also progressive. We find that direct cash transfers are well targeted and are especially effective in reducing extreme poverty. We also find that in-kind transfers are effective in reducing inequality. Finally, direct and indirect taxes have a positive, though small, effect on inequality.

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The unauthorized commercial use of Bank documents is prohibited and may be punishable under the Bank's policies and/or applicable laws. Terms of use: Documents inCopyright © 2013 Inter-American Development Bank. This working paper may be reproduced for any non-commercial purpose. It may also be reproduced in any academic journal indexed by the American Economic Association's EconLit, with previous consent by the Inter-American Development Bank (IDB), provided that the IDB is credited and that the author(s) receive no income from the publication. 1 Abstract 1Since 2004 the government of Peru has implemented a process of participatory budgeting (PB), which is mandatory for every sub-national government. We analyze the link from PB to coverage and water service quality indicators. We find no statistically significant relationship between PB and our measures of coverage and service continuity, regardless of whether the outcome variables are measured in levels or in changes. Qualitative evidence collected in a sample of municipalities is consistent with this result. Further, PB in the water sector may also lead to inequitable outcomes as the poor may confront greater costs of participation. At the root of this lack of connection we find weaknesses both in the PB process itself as well as among the different actors in the process: citizens, municipalities and water service providers.JEL codes: H42, H72, D7

Latin America stands out among different regions in the world for her high employment termination costs. To this contribute both a high level of severance payments and the existence of overlapping benefits. The effectiveness of these protective measures, however, is limited by the size of the informal sector, which, in turn, may be related to employment protection levels. Another important limitation on the effectiveness of employment protection regulation is the often large transaction costs associated with making good of law provisions for the worker. Equilibrium severance pay levels may thus be well below what law mandates as evidence of low coverage rates and undesirable side effects is mounting, reform seems a critical policy issue. However, this reform cannot focus exclusively on severance pay, but it has to incorporate other overlapping benefits, such as UISAs, and advance notice. It also has to contend with a problematic political economy.