世界銀行-島上的財政發(fā)病率：格林納達(dá)的財政制度及其發(fā)病率 （英）

PublicDisclosureAuthorizedPublicDisclosureAuthorized

PolicyResearchWorkingPaper10678

FiscalIncidenceontheIsland

Grenada’sFiscalSystemandItsIncidence

GustavoCanavire-Bacarreza

GuillermoGómezAliaga

ChevanneBritton

FernandoRios-Avila

WilsonJimenezPozo

SilviaGranadosIbarra

RanLi

WORLDBANKGROUP

PovertyandEquityGlobalPractice&

Macroeconomics,TradeandInvestmentGlobalPractice

January2024

PolicyResearchWorkingPaper10678

Abstract

ThispaperexaminesthedistributionaleffectsoffiscalpolicyinGrenada.Usingdatafromthe2017–18LivingConditionsandHouseholdBudgetsSurveyandfollow-ingtheCommitmenttoEquityanalysisframework,thepaperestimatestheeffectsoffiscalpolicyinterventionsoninequalityandpoverty.Itanalyzesthedistributionalincidenceofdirectandindirecttaxes,directtransferspro-videdbysocialtransfersandschoolfeedingprograms,andin-kindtransfersgeneratedbypublicservicesinhealthand

education.TheresultsshowthatGrenadahasataxsystemthatisneutralonthevalue-addedtaxsideandprogressiveonthepersonalincometaxside.Furthermore,directtrans-fersmakeamodestcontributiontopovertyreductionandarealmostneutralintheirdistributiveimpact.TheresultscontributetotheunderstandingofwhobearstheburdenoftaxationandbenefitsfromtransfersandofhowGrenada’sfiscalsystemcanimproveitsredistributiveeffect.

ThispaperisaproductofthePovertyandEquityGlobalPracticeandtheMacroeconomics,TradeandInvestmentGlobalPractice.ItispartofalargereffortbytheWorldBanktoprovideopenaccesstoitsresearchandmakeacontributiontodevelopmentpolicydiscussionsaroundtheworld.PolicyResearchWorkingPapersarealsopostedontheWebat

/prwp.Theauthorsmaybecontactedatgcanavire@

;ranli@;Chevanne.britton@;friosa@;wjimenezpozo@;sgranadosibarra@;andggomezaliaga@.

ThePolicyResearchWorkingPaperSeriesdisseminatesthefindingsofworkinprogresstoencouragetheexchangeofideasaboutdevelopmentissues.Anobjectiveoftheseriesistogetthefindingsoutquickly,evenifthepresentationsarelessthanfullypolished.Thepaperscarrythenamesoftheauthorsandshouldbecitedaccordingly.Thefindings,interpretations,andconclusionsexpressedinthispaperareentirelythoseoftheauthors.TheydonotnecessarilyrepresenttheviewsoftheInternationalBankforReconstructionandDevelopment/WorldBankanditsaffiliatedorganizations,orthoseoftheExecutiveDirectorsoftheWorldBankorthegovernmentstheyrepresent.

ProducedbytheResearchSupportTeam

FiscalIncidenceontheIsland:Grenada’sFiscalSystemandItsIncidence

*

GustavoCanavire-Bacarreza

?

GuillermoGómezAliaga

?

ChevanneBritton

§

FernandoRios-Avila

**

WilsonJimenezPozo

??

SilviaGranadosIbarra

??

RanLi

§§

Keywords:Fiscalincidence,Poverty,Inequality,Taxes,SocialTransfers,PublicExpenditure,PublicRevenue

JELCODES:D31,H11,H22,H5,I14,I24,I3,O54

*Thefindings,interpretations,andconclusionsexpressedinthispaperdonotnecessarilyreflecttheviewsoftheWorldBank,theExecutiveDirectorsoftheWorldBankorthegovernmentstheyrepresent.TheWorldBankdoesnotguaranteetheaccuracyofthedataincludedinthiswork.TheauthorswouldliketothankCarlosRodríguez-Castelan,

GabrielaInchauste,CesarCanchoandGabrielLaraforhelpfulcommentsandsuggestions.

?TheWorldBank,PovertyandEquityGlobalPractice;

gcanavire@.

?TheWorldBank,PovertyandEquityGlobalPractice;

ggomezaliaga@.

§Grenada’sMinistryofFinance;

chevanne.britton@.

**LevyInstituteatBardCollege;

f.rios.a@.

??FundacionAru;

wjimenezpozo@.

??TheWorldBank,PovertyandEquityGlobalPractice;

sgranadosibarra@.

§§TheWorldBank,MacroeconomicandTradeGlobalPractice;

ranli@.

2

1.Introduction

Becauseoftheiridiosyncraticeconomiccharacteristics,smallislanddevelopingstates(SIDS)facegreaterchallengesthatelevatethecostsassociatedwithdeliveringpublicservices,includingeducation,health,andsocialprograms.Thedirectimpactsofthesechallengeshaverepercussionsonpublicfinances,pushinggovernmentstoassessandprioritizesectorsindeterminingwheretofocustheirinvestments(OECD2018).ThisproblemisaggravatedbythevulnerabilityofSIDStoshocksthatlimittheirdomesticrevenuegeneration,largelyduetotheirdependenceontourismactivities(OECD2018).Inthiscontext,afiscalincidenceanalysisbecomesofprimeimportance,asLustig(2020)pointsout.

ThispaperfocusesonGrenada,anSIDSwithapopulationofaround113,000,thatishighlydependentontourism.Asaresult,thecountryisvulnerabletoclimaticshocksandeconomicdownturnsindevelopedcountries.Grenadaisathighriskforclimate-relateddisasters,rankingthirdgloballyintermsofGDPvulnerabilityandseventhintermsoffatalitiesper100,000inhabitantsduetoweather-relatedlosses.Approximatelyone-fifthofthecountry’spopulationlivesbelowthenationalpovertyline(OECD2018;WorldBank2021;Grenada,MinistryofForeignAffairs2022).TheCOVID-19pandemicseverelyimpactedGrenada’seconomy,particularlyitstourismsector,leadingtoasignificanteconomiccontractionandincreasedunemployment.

1

Thegovernment’sresponsemeasurescontainedtheinitialspreadofthevirus,butsubsequentwavescausedfurthereconomicchallenges.Despitesomerecoveryin2021,Grenada’sGDPremainsbelowpre-pandemiclevels,andthegovernmenthadtosuspendthefiscalruleforthreeconsecutiveyearstoaddressthepandemic’sextendedimpacts.

2

Theextendedimpactsofthepandemichavemadeadditionalfiscalstimulusnecessary(seeAppendixA)tosupportvulnerablegroupsandmaintaineconomicactivities.

Thepaperexaminestheredistributiveimpactoftaxesandpublicspending,followingtheCommitmenttoEquity(CEQ)framework(Lustig2018).Theframeworkaimstoprovideacomprehensivepictureoftheredistributiveeffectsoffiscalpoliciesonhouseholdincomeandconsumption.HeretheCEQframeworkisusedtoassessGrenada’sfiscalpolicies,focusingonpreandpostfiscalincomesinordertodeterminethenetbeneficiariesandpayersofthesepolicies(Lustig2020).FortheGrenadacontext,afiscalincidenceanalysisthroughtheCEQframeworkisrelevant,becauseitcanprovideevidenceconcerningtheextenttowhichthegovernment’sfiscalpoliciesareimpactingthewelfareofthecountry’shouseholdsandinformfuturepolicydecisions.

Thispapermakesmultiplecontributionstotheexistingliterature.First,weassessthefiscalsystemofanSIDS,Grenada,whichfacesresourceconstraints,naturalhazards,andahighpovertyrate.Thesecharacteristicsmakeitimportanttodeterminewhetherthecountry’sfiscalsystemhasaredistributiveimpact.Furthermore,Grenadaislocatedinaregionwherefiscalincidenceisunderstudied.PreviousworkonCaribbeanislandsusingtheCEQmethodologyhasfocusedonbiggerandmoredevelopedislandssuchasJamaica(Katayamaetal.2021),

1BeforetheCOVID-19pandemic,Grenadawasmakingastrongcommitmenttoeconomicreformandresiliencebuildingwiththesupportofinternationalorganizations.Itachievedanaverageannualgrowthof4.5percentbetween2014and2019,surpassingtheregionalaverage.Fiscalreforms,includingtheFiscalResponsibleAct(FRA)of2015,ledtoasignificantreductioninpublicdebtandtheaccumulationofafiscalsurplus.Nevertheless,Grenada’seconomyremainslessdiversifiedandhighlysusceptibletoclimatechangeandnaturaldisasters.

2MFMODDatabase,theWorldBank’sWorldDevelopmentIndicators(WDI),andGEMdatabases,IMF.Mostsourcesavailablein

/

.

3

Barbados(García-Pe?aBersh2019),andtheDominicanRepublic(Aristy-Escuderetal.2016).Second,weprovideacomparisonwithsimilarcountriesintheCaribbeaninordertounderstandthedifferencesbetweenasmalldevelopingislandandlargercounterparts.Finally,weincorporateintotheanalysisfiscalinterventionsthathavenotbeenpreviouslyanalyzed,suchasthepersonalincometax(PIT),whichwasreadjustedin2019;themostimportantdirecttransfertopoorandvulnerablehouseholds,theSupportforEducation,EmpowermentandDevelopmentProgramme(SEED);andschooltransfers.

TheresultsindicatethatGrenada’sfiscalsystemhasthepotentialtodecreasepovertyratesandinequalityinthecountry,butitshowsneutralincidence.Grenada’sfiscalpolicydesignisindeedorientedtowardthelow-incomepopulation.Focusingonlyoninequalityandaccountingforallfiscalinterventionsdoesdecreaseinequality,asobservedincountrieslikeJamaicaandtheDominicanRepublic.TheseresultspointtotheredistributivepotentialoffiscalpoliciespursuedbythegovernmentofGrenada.Asexpected,highersegmentsoftheincomedistributionpaymoretaxesthanthelow-incomepopulation,andfurthermore,themiddle-incomepopulationpaysmorethantheyreceive,asdoesthepopulationmakingupthehighpartoftheincomedistribution.However,overallindirecttaxestendtobeneutral,meaningtheyaffecthouseholdincomeproportionallyacrosstheincomedistribution;thesetaxesdolowerinequality,butalsoincreasepovertyrates.Whiledirecttaxes(PIT)donothaveaneffectonpoverty,theyhelptoreduceinequalityinGrenada,indicatingawell-targetedstructure.Insum,indirecttaxesareneutral,anddirecttaxesarealmostprogressive.

Inthecaseofdirecttransfers,theireffectonreducingpovertyishigherthantheirimpactoninequality.However,SEEDreducesheadcountpovertybyalmostthreepercent,signalingthatthepolicyiswelltargeted,butithasalowredistributiveeffect,eventhoughlow-incomehouseholdsreceiveahigheramount,indicatingthisprogramisrelativelyregressive.In-kindtransfersshowmixedresults:governmentfundingofeducationbenefitsthepoor,withprimaryandsecondaryeducationbenefitinglow-andmiddle-incomehouseholds,whilegovernmentfundingoftertiaryeducationbenefitsthehigherechelonsoftheincomedistribution.Healthisclearlyregressive,providingagreaterbenefittopoorerhouseholds.However,theirimpactonmonetarypovertyischallengingtodescribeduetotheneedtomonetizetheseservicestoestimatetheireffect.

Followingthisintroduction,section2providesthecontextofGrenada’seconomicperformanceandpovertyandinequalitysituation,aswellasanoverviewoffiscalrevenuesandexpenditures.Thefiscalincidencemethodologyisdescribedinsection3,whilesection4presentsthemainresults.Section5concludesthepaper.

2.Grenada’sContext:Growth,Poverty,andFiscalPerformance

Grenada’seconomicgrowthisheavilyaffectedbyexternalfactors,thoughstructuralreformscontributedtothecountry’ssustainedpositivegrowthbetween2014and2019

(figure13,

AppendixA1).Thankstogrowth-enhancingreformsthatexpandedtourismandabenignglobaleconomicenvironment,realoutputgrowthaveraged4.5percentannuallybetween2014and2019.ThehighgrowthrateledtoadramaticincreaseinGrenada’spercapitaGDP.By2019,Grenada’sGDPpercapitawasonlysurpassedbythoseofSt.KittsandNevisandAntiguaandBarbuda

(figure14,

AppendixA1).However,thepandemic,compoundedbythewarinUkraine,endedthetrendofsolidgrowthandledtoasharpeconomiccontractionof13.8percentin2020,followedbyaslowrecoveryin2021–22.TheeconomicvolatilitydrivenbyexternalfactorsreflectstheintrinsicvulnerabilitiesofGrenadaasanSIDS.

4

0.40

0.37

0.45

1998

2008

Gini

2018

Inlinewiththemacroeconomicbehavior,moderatepovertydecreasedfrom2008to2018.However,inthesameperiodextremepovertyincreasedslightly.Asof2018,Grenada’spovertyratehaddecreasedbyalmost13percentagepointscomparedto2008(thepreviousyearforwhichdatawereavailable).Incontrast,extremepovertyinGrenadaincreasedby1.2percentagepoints

(figure1,

panela).Regardinginequality,weobservethatduringthis10-yearperiod,theGinicoefficient,whichmeasurestheinequalityoftheincomedistribution,increasedfrom0.37to0.40

(figure1,

panelb).Thisincreaseininequalityfrom2008to2018mayimplysomedegreeofdeteriorationofconditionsforthelowerpartoftheconsumptiondistribution,whichisalsoshownintheincreaseoftheextremepovertyrateduringthisperiod.

Figure1PovertyandInequalityMeasures

(a)PovertyandIndigence(%)(b)GiniIndex

37.7

32.1

24.8

12.9

2.43.6

199820082018

ExtremepovertyTotalpoverty

Sources:GovernmentofGrenada,CentralStatisticalOffice,SurveyofLivingConditionsandHouseholdBudgetSurvey(SLCHBS)1998,2007–08,and2018–19.

Grenada’sfiscalpositionhasvariedovertheyears,partlyduetonaturalandexternalshocks.Followingamodestperformancein2009–13,revenuesandgrantcollectionshiftedtoanupwardtrajectoryin2014,growingbyanaverageof11.2percentannuallyuntil2019.Taxesaccountedfor83.2percentoftotalgovernmentrevenuebetween2009and2021

(figure2)

.Taxrevenuecomprisesdirectandindirecttaxesleviedonindividualsandbusinesses.Thedirecttaxesaretaxesonincomeandprofitsandonproperty,whiletaxesondomesticgoodsandservicesandoninternationaltradeandtransactionscomprisetheindirecttaxes.Forthepurposesofthispaper,wefocusonthePITunderdirecttaxesandthevalue-addedtax(VAT)andexcisetaxunderindirecttaxes,becausethesehavethemostsignificantimpactonindividualsandhouseholdswhilealsobeingcrucialincomeearnersforthegovernment,asshowninfigure3.PITin2021accountedfor53.4percentofTaxesonIncomeandProfitsand10.2percentoftaxrevenue.TheVATaccountedfor83.8percentofTaxesonDomesticGoodsandServicesand35.0percentoftotaltaxrevenuein2021.BecausetheVATischargedtoconsumersatthepointofpurchase,ithasimplicationsforindividualandhouseholdconsumption.Theexcisetaxischargedatafixedrateperquantityofspecificgoods(importedandlocallymanufacturedgoods)referredtoas“excisablegoods”andaccountedfor2.8percentoftaxrevenuein2021.

5

Figure2RevenueandGrantsCollection

Source:EasternCaribbeanCentralBankStatistics.

3

Figure3TaxRevenuebyTaxType

■TaxesonlnternationalTadeandTransactions

■TaxesonDomescicGoodsandservices

■Taxesonlncomeandprofits

Source:EasternCaribbeanCentralBankStatistics.

4

Turningtogovernmentexpenditures,onaverage,from2017to2021,32percentwasallocatedannuallytosocialprograms,includingeducation,health,andpublicassistancetransfers

(figure

15,

AppendixA2).

5

ThemostimportantdirecttransfertopoorandvulnerablehouseholdsisdonethroughSEED,whichisadministeredthroughtheMinistryofSocialDevelopment.AlsoimportantistheSchoolFeedingProgramme,whichfocusesonprovidingmealstoneedystudents.

Expendituresineducationincreasedovertheperiod2017–21andaccountedforroughly10percentofannualgovernmentexpenditures

(figure16,

AppendixA3).Governmentrecurrentexpenditureinpubliceducationgenerallyisprovidedinfourstages:pre-primary,primary,secondary,andtertiary(includingvocationaltraining).Severalinstitutionsalsoprovidespecialeducationtoservestudentswithdisabilitiesandspecialneeds.Thegovernmentlargelysubsidizeseducationuptothesecondarylevel(includingspecialeducation).Thelevelofsubsidizationdecreasesatthetertiarylevel,withhigherfeesrequiredtoaccesstrainingleading

3Availablein

/statistics.

4Availablein

/statistics.

5ThisisbasedondataretrievedfromtheAnnualNationalBudgetandexcludesdebtrepayments(bothprincipalandinterest).In2022,theGrenadagovernmentinstitutedacapongasolineprices,whichconstitutedanenergysubsidy.Thismeasurewillbeanalyzedinafutureiterationofthetool.

6

toassociatedegreesandcertificationsfromtheinstitutionsprovidingthislevelofschooling.Governmentexpenditureinpubliceducationisconsideredanin-kindtransferbecausetheservicecanbeaccessedbyallschool-agechildrenregardlessofsocioeconomicbackground.

Expendituresonhealthalsoincreasedintheperiod2017–21,accountingfor7percentofannualgovernmentexpenditureasof2018

(figure16,

AppendixA3).Inthispaper,fundsspentbythegovernmentinthehealthsectoramounttoin-kindtransferstothepublicbecausetheseservicesareavailabletoall.Citizens,residents,andvisitorscanfreelyaccesstheservicesinthepublichealthsystemwithnodifferentiationinfees

6

accordingtoincomelevelorsocioeconomicclass.

Inadditiontothein-kindtransfersineducationandhealth,thegovernmentimplementedasocialprotectionsystemwithintheSEEDprogram.Theprogramtargetedschool-agechildren,peoplewithdisabilities,theelderly,thechronicallyill,pregnantwomen,lactatingmothers,andtheadultpoor.Beneficiariesareselectedviaproxymeanstesting,whichuseshouseholdcharacteristicssuchasage,householdsize,maritalstatus,assets,disability,andhousingconditionsasindicatorsor“proxies”todeterminehouseholdexpenditureorconsumption.Cashistransferredtohouseholds:in2017,itwasEC$300permonthorEC$3,600perannum.In2018,theamountgiventoelderlyhouseholdswasincreasedbyEC$100permonth,andin2022,thegovernmentraisedtheamountpaidtoallbeneficiariesbyEC$150permonth.GovernmentannualexpenditureonSEEDincreasedfromEC$14millionin2017toapproximatelyEC$18millionin2021andisexpectedtohaveincreasedfurtherin2022.From2017to2021,thegovernmentspentanaverageofEC$2.9millionperyearontheschoolfeedingprogram.

3.DataSources

TheprimarydatasourceistheSurveyofLivingConditionsandHouseholdBudgets(SLCHBS)conductedbytheCentralStatisticalOffice(CSO),thecountry’snationalstatisticsoffice,betweenAprilandMayof2018–19.Thissurveyencompassedasampleofapproximately1,689households.Theprimaryobjectiveofthisquestionnairewastocollectinformationrelatedtohouseholdsocioeconomicandlivingconditionsaswellasthehouseholdbudgetinordertoconstructtheconsumptionvariable(asthesurveydidnotcollectincomeinformation),datathatarecrucialformeasuringpovertyinGrenada.Itshouldbenotedthatthissurveydidnotgatherinformationregardingpensionsreceivedoranysocialsecuritycontributions,neitherbyindividualsnorthegovernment.Thesurveycomprisedtwodistinctparts,onefocusingonhouseholdconditionsandanotherforobtainingindividualcharacteristicsofeachhouseholdmember.Thepersoninterviewedwasoneadultmember(olderthan18yearsold),thoughthesurveycollectedinformationoneverysinglehouseholdmember.

7

TheuseofadministrativedataontaxablewagesforthePITcomplementsthesurveyinformation.ThesourceofthisdatasetwastheInlandRevenueDivision(IRD),adivisionwithinGrenada'sMinistryofFinance(MOF).Thisdatasetcoverswagesfordifferentworkersandisdisaggregatedintotwoparts:theestimationoftheshareofthewageallocatedforpensionfunds,andtheotherbeingthegrossincome,whichisthetaxablepartofthewagereceived.

6Feesarewaivedforsomeservicesprovidedtochildren,theelderly,andtheindigent.Allfeesandco-paymentswerenotincludedintheanalysisgiventhelowamountsreportedintheSLCHBSof2017–18.

7Toevaluatetheaccuracyofthedataforfiscalinterventions,amacroeconomicvalidationispresentedinAppendixB3.

7

Weutilizethisadministrativedatabasefortwoyears,2017with7,442observationsandfor2018with8,146.

Becauseincomeinformationisnotavailableinthesurvey,wecomparetheadministrativedata,specificallythetaxableportion,withtheconsumptionestimation.Thisallowsustoobtainamorecomprehensiveunderstandingoftheincomedistribution.Insomecases,wecomplementmissingsurveyinformationwithadministrativedata.Becausethisdatasetisdisaggregatedbygenderandoccupationalcategory,bothwithvaluesforthetaxableincome,theadministrativedataproveuseful.Additionally,theadministrativedataenableustocomparetheincomedistributiontoensuredataconsistencyandimprovetheexercise'smacroeconomicvalidation.Theresultisanaccuratesetofinformationthatmakesconstructingthetaxableincomedistributionpossible.

4.Methodology

ThispaperusestheCommitmenttoEquity(CEQ)methodologytoassessthedistributionalimpactofthefiscalsysteminGrenada.AccordingtoLustig(2018),“TheCEQAssessmentisadiagnostictoolthatusesfiscalincidenceanalysistodeterminetheextenttowhichfiscalpolicyreducesinequalityandpovertyinaparticularcountry”(62).Fiscalredistributioneffectsrefertotheprocessbywhichastatecollectsrevenuefromindividualsandhouseholds(throughtaxation)andallocatesthisrevenuetofinancedirecttransfers,subsidies,andin-kindbenefitsindividualsandhouseholdsenjoy(LustigandHiggins2018).Becausethisstudyfocusesonthedistributionaleffectsonthepopulation,stateinterventionsthataffectfirmsorotherprivate-sectorinstitutionsareexcludedfromthemethodology.TheCEQframeworkaimstoanswerfourmainquestions:(1)Howmuchincomeredistributionandpovertyreductionisbeingaccomplishedthroughfiscalpolicy?(2)Howequalizingandpro-poorarespecifictaxesandgovernmentspending?(3)Howeffectivearetaxesandgovernmentspendinginreducinginequalityandpoverty?and(4)Whatistheimpactoffiscalreformsthatchangeaparticulartaxorbenefit'ssizeand/orprogressivity?(Lustig2018).

Tocalculatethedistributionaleffectsoffiscalpolicy,theCEQframeworkconstructsdifferentincomeconceptsinsequentialstages,startingfrompre-fiscalincomethatincludesonlyprivateincomesourcestofinalincomethatincorporatesthe(almost)fullsetoftaxesandgovernmentbenefits.Insummary,theCEQ(LustigandHiggins2018)identifiesfourmainconceptsofhouseholdincome(whenthehouseholdsurveysincludevariablesofdifferentsourcesofincome).

8

8Marketincomeincludesfactorincome(allwagesandsalariesreceivedbyworkersandcapitalincome),plusprivatetransfers(remittances,privatepensions,etc.)plusimputedhousingrent,allincomebeforetaxesandsocialsecuritycontributions,governmenttransfersandold-agepensions,minusthecontributiontosocialinsuranceold-agepensions(onlyincaseswherepensionsareconsidereddeferred.Thecontributiontoold-agepensionsisnotsubtractedwhencontributorypensionsarefinancedbythestate).Disposableincomeismarketincomeplusdirectcashandnear-cashtransfers,minuspersonalincometaxesandemployeesocialsecuritycontributions(onlywhencontributorypensionsaretreatedastransfers).Consumableincomeincludesindirectsubsidies(energy,food,andothergeneraltargetedpricesubsidies)andexcludesindirecttaxes(VAT,excisetaxes,andotherindirecttaxes).Finalincome(post-fiscal)isconsumableincomeplusthevalueofin-kindtransfers,suchasfreeorsubsidizedgovernmentservicesineducationandhealthwithcopaymentsanduserfeessubtracted;itreflectspost-fiscalincome.

8

Foreachincomeconcept,theinequalityandpovertyindexesarecalculatedandbothmagnitudesarecomparedbeforeandafterfiscalinterventions.Inthisregard,theCEQframeworkconsidersvariantsaccordingtothecharacteristicsofeachcountry,harmonizingtheaggregatesbutnotthespecificitems.

4.1IncomeAggregatesEstimation

Grenada’sinformationsystemhaslimitationswhenitcomestoapplyingthedetailedCEQframework.Certaindatacharacteristicsareneededtomodelfiscalincidencewithinthisframework,suchasanadequatehouseholdincomeaggregate.WhileGrenadahasconductedtheSLCHBSrecently,

9

aswellasmaintainingadministrativerecordsofsocialprogramsandthecharacteristicsofthetaxsystem,themoduleofincomeswithintheSLCHBSislimited.Thesurveycapturesincomedatainbrackets,recordsfewdetailsonnonlaborincomes,anddoesnothaveinformationonpensionaffiliationoramountreceivedbyindividuals,soitisnotpossibletoconstructnetmarketincomepluspensionsforthisexerciseintheGranadacontext.Thus,theNSOoptedforbuildingwelfareaggregatesfromhouseholdconsumption

10

insteadofhouseholdincome.Thisposesachallengefortheimplementationinthispaperbecauseweneedhouseholdincomestoestimatethefiscalincidenceandrunsimulations.Following(Katayama&al.,2021)forthecaseofJamaica,inthispaperweassumethatcurrentconsumptionequalsdisposableincome.

11

ThisassumptionisthemostimportantforapplyingtheCEQmethodologytoGrenada,inthatitsimplifiesthereconstructionofincomeaggregatesbytracingbacktomarketincomedefinitionasourmeasureofbaseincome(beforetaxesorfiscalinterventions).Asisknownintheestimationofwelfaremeasuresindevelopingcountries,thedistributionofhouseholdconsumptiontendstobemoreconcentratedthanincome.Ofcourse,thischaracteristiccouldintroducesomebiasandunderestimatetheextremesofthedistribution;however,thereisnootheroptionintheabsenceofhouseholdincomedata.

Oncehouseholdconsumptionisdefinedandthusconsumableincomeisavailable,therestoftheincomeaggregatesestablishedintheCEQmethodologyarecalculatedaccordingtothetaxstructure,socialprotection,andsocialdeliveryinGrenada.Ourpointofdepartureisdisposableincome,whichisreportedbythesurveyandisassumedtoequalhouseholdconsumption.Then,toidentifythedistributionofgrossincomeand,afterthatrecreatethedistributionofthemarketincome,itisnecessarytoworkbackward,followingthestepsshownin