_Polky, Planning, and Research Working Paper_ **_Series_** 46 heavily on males, and expenditure taxes on females. Generalized sales taxes tend to be biased against women but male and female spending patterns are different, so sales taxes can be gender-targeted.

By increasing entry-level wages relative to wages at senior levels, minimum wage laws tend to favor women. To the extent that minimum wages are falling, the wage structure isbecominglessfavorable to women.

This paper is a product of the Women in Development Division, Population and Human Resources Department. Please contact Johanna Klous, room S9-121, extension 33745

## 130. Maternal Education and the Vicious Cycle of High Fertility and Malnutrition: An Analytic Survey

## Matthew Lockwood and Paul Collier

_To break the vicious cycle ofpoor nutrition - and high fertility reinforced by women's low status - maternal and child health policy, including family planning, should be integrated into public policy and linked to education._ Evidence is increasing that one-dimensional policies, such as family planning and supplemental feeding programs, have little chance on their own of achieving the desired objectives - that what is called for is a maternal and child health policy, including family planning, integrated into public policy and linked to education.

While family planning is probably more cost-effective in reducing fertility than programs for child mortality or increasing education, family planning programs are often more effective when child mortality rates are lower and levels of education are higher. In the long term, the most cost-effective approach to reducing fertility is probably to integrate family planning with efforts to improve maternal-childhealthandeducation. Onthe other hand, if the aim is increasing income per capita, educational policies dominate family planning measures, despite large cost differentials.

Similarly, where the aim of public health provision is to reduce mortality and improve nutrition, there is a strong consensus that integration and coordination of maternal-child health services, especially with educational and literacy policy, is essential and cost-effective. Improving women's ability to work and earn outside the home improves their economic position and power (and probably - expenditures on children) although if their nutritional status is already marginal, working harder to produce more may be a mixed blessing. We must ask: how much extra income do they bring to the household, and to what extent do they maintain control over the income they earn? Also, if mothers and children enjoy more income and autonomy through mothers' employment outside the home, but suffer from the conditions of the work itself, or from lack of adequate childcare alternatives, public policy could alleviate these difficulties - for example, through raising the productivity of women's labor (better access to credit, extension, and markets) and through relaxing the constraints on women's welfare (giving them more schooling, which will give them access to better jobs, more money, and more control over it, as well as enable them to take better care of their children).

This paper is a product of the Women in Development Division, Population and Human Resources Department. Please contact Johanna Klous, room S9-123, extension 33745.

## 131. Implementing **Direct** Consumption **Taxes** In Developing Countries

## George R. Zodrow and Charles E. McLure Jr.

_This paper argues that replacing an income tax with a direct tax on individual consumption may be a feasible policy option for a developing country. Such a tax should include (1) a flat-rate "consumption-based' business tax that allows immediate expensing of all business-related nonfinancial purchases, and (2) an individual tax with progressive marginal rates on a base of all wages and pension receipts plus gifts and inheritances received. It could be supplemented by anidual wealth tax._ This report examines the possibility of using a direct tax on consumption as a replacement for an existing income tax within the context of a developing country. The structural differences between income and consumption taxes are described, and some simple examples are used to illustrate the basic differences in the taxation of businesses and individuals under the two approaches. A variety of critical structural features of a direct consumption tax are addressed, including (1) the rationale for including a business tax in a consumption-based tax system, (2) the treatment of debt at the business level, (3) the differences between "cash flow" and "tax prepayment" treatment at the individual level,and(4) alternative means of taxing gifts and bequests at the individual level.

The report includes a brief survey of the extensive literature on the choice between income and consumption as the basis for a system ofdirect taxation. This survey compares the relative merits of the two approaches in terms of the standard criteria of simplicity, equity, economic neutrality andefficiency, and consistency with economic growth. The discussionfocusesonissuesthatareparticularly relevant in a developing country context, and argues (primarily on simplicity grounds) that a consumption tax may well be preferable toanincome tax as the form of direct taxation in a developing country.

After a detailed discussion of the choice between cash flow and tax prepayment treatment at the individual level under a direct consumption tax, the analysis concludes that for simplicity reasons the individual tax prepayment approach is the more appropriate one in the developing country context. The report then describes the structure and implementation of such a direct consumption tax. The discussion includes an examination of international and transitional issues, and also comments on the desirability and feasibility of supplementary wealth taxes and taxation on a presumptive basis.

This paper is a product of the Public Economics Division, Country Economics Department. Please contact Ann Bhalla, room NlO-061, extension 60359.

# 132. Is **the Discount on the Secondary Market a Case** for **LDC Debt Relief?**

## Daniel Cohen

_A discount in the secondary market is a case for debt service relief but not necessarilyforawrite-off Theauthorderivesa 'maximum repayment'rescheduling program, which trades off higher current investment for louwer current debt service._ _Proposition 1:_ The "maximum repay-