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We quantitatively investigate the macroeconomic and distributional impacts of fiscal consolidations in low-income countries (LICs) through value added tax (VAT), personal income tax (PIT), and corporate income tax (CIT). We extend the standard heterogeneous agents incomplete markets model by including multiple sectors and rural-urban distinction to capture salient features of LICs. We find that overall, VAT has the least efficiency costs but is highly regressive, while PIT impacts the economy in the opposite way with CIT staying in between. Cash transfers targeting rural households mitigate the negative distributional impacts of VAT most effectively, while public investment leads to little redistribution.

Macroeconomics --- Public Finance --- Taxation --- Industries: Manufacturing --- Personal Income, Wealth, and Their Distributions --- Fiscal Policy --- Taxation and Subsidies: Externalities --- Redistributive Effects --- Environmental Taxes and Subsidies --- Macroeconomics: Consumption --- Saving --- Wealth --- Taxation, Subsidies, and Revenue: General --- Business Taxes and Subsidies --- Industry Studies: Manufacturing: General --- Aggregate Factor Income Distribution --- Public finance & taxation --- Manufacturing industries --- Consumption --- Revenue administration --- Value-added tax --- Manufacturing --- Income --- National accounts --- Taxes --- Economic sectors --- Economics --- Revenue --- Spendings tax --- Ethiopia, The Federal Democratic Republic of

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The Covid-19 pandemic has aggravated the tension between large development needs in infrastructure and scarce public resources. To alleviate this tension and promote a strong and job-rich recovery from the crisis, Africa needs to mobilize more financing from and to the private sector.

Public-private sector cooperation --- Infrastructure (Economics) --- Economic development --- South Africa --- Economics: General --- International Economics --- Infrastructure --- Investments: General --- Public Finance --- Macroeconomics --- Sustainable Development --- International Investment --- Long-term Capital Movements --- International Finance: General --- Economic Development: General --- Economic Development: Financial Markets --- Saving and Capital Investment --- Corporate Finance and Governance --- Economywide Country Studies: Africa --- Investment --- Capital --- Intangible Capital --- Capacity --- National Government Expenditures and Related Policies: Infrastructures --- Other Public Investment and Capital Stock --- Aggregate Factor Income Distribution --- Political economy --- International institutions --- Public finance & taxation --- Development economics & emerging economies --- National accounts --- Private investment --- Public investment and public-private partnerships (PPP) --- Expenditure --- Income --- Sustainable Development Goals (SDG) --- Development --- Sustainable development --- Saving and investment

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Despite sustained economic growth and rapid poverty reductions, income inequality remains stubbornly high in many low-income developing countries. This pattern is a concern as high levels of inequality can impair the sustainability of growth and macroeconomic stability, thereby also limiting countries’ ability to reach the Sustainable Development Goals. This underscores the importance of understanding how policies aimed at boosting economic growth affect income inequality. Using empirical and modeling techniques, the note confirms that macro-structural policies aimed at raising growth payoffs in low-income developing countries can have important distributional consequences, with the impact dependent on both the design of reforms and on country-specific economic characteristics. While there is no one-size-fits-all recipe, the note explores how governments can address adverse distributional consequences of reforms by designing reform packages to make pro-growth policies also more inclusive.

Birth control --- Developing countries. --- Emerging nations --- Fourth World --- Global South --- LDC's --- Least developed countries --- Less developed countries --- Newly industrialized countries --- Newly industrializing countries --- NICs (Newly industrialized countries) --- Third World --- Underdeveloped areas --- Underdeveloped countries --- Aggregate Factor Income Distribution --- Agribusiness --- Agricultural economics --- Agricultural industries --- Agricultural sector --- Agriculture: General --- Business Taxes and Subsidies --- Economic sectors --- Income distribution --- Income inequality --- Income --- Macroeconomics --- National accounts --- Public finance & taxation --- Spendings tax --- Taxation --- Taxes --- Value-added tax --- Honduras