The politics of what works for the poor in public expenditure and taxation: a review

Abstract

The paper examines the questions of which fiscal (public expenditure and taxation) options work in terms of poverty reduction, and how they can be made implementable in practice. The point of departure is that although the poor, acting on their own, are politically weak, nonetheless there are ways in which they can make themselves essential to the elite, and this in combination with relevant policies and institutions has enabled poverty, in some countries and regions, to fall dramatically. Yet others have been excluded from this process. Our review identifies the following areas of policy and institutional development as requiring further exploration and testing through the life of the RPC: (1) The distributional impact of public expenditure and taxation, with emphasis on the sectors of agriculture and social protection, and on the instruments of input subsidy and ‘progressive’ export taxation; (2) The politics of forming pro-poor coalitions, with emphasis on reforms of distributive justice as an instrument for achieving this; (3) The politics of escaping from the low-tax trap, with emphasis on the role of aid donors