the poor get a less than proportionate share of transfers). A negative concentration index is also said to indicate that the transfer is “pro-poor”.

Relative progressivity can be summarized in the Kakwani index. The Kakwani index (Kakwani, 1977) is a measure of the relative progressivity of a social policy intervention (tax or transfer). In the case of a tax, it is defined as the difference between the concentration coefficient of the tax and the Gini coefficient of the pre-tax-and-transfer incomes (or the chosen welfare indicator). In the case of transfers, it is the negative of the difference; namely, the difference between the Gini coefficient of the pre-tax-and-transfer incomes and the concentration coefficient of the transfer. Progressive interventions have positive Kakwani coefficients, and regressive ones have negative coefficients.

All direct and in-kind transfers in Mongolia are “pro-poor” and progressive. Pensions, child money transfers, and other social welfare transfers, as well as expenditures in public pre-school, basic education and health have negative concentration coefficients. Consequently, their Kakwani indexes are all positive, with respect to any income definition (Table 4). This means that all these transfers represent a larger share of income among the poor than among the rich and the larger share of their total budget is allocated to poorer population groups. The only exception is in-kind transfers in tertiary education. In this case the concentration coefficient is positive, which means that poorer groups of the population get a smaller share of the total budget allocated to public expenditures in tertiary education. However, the Kakwani coefficient for tertiary education remains positive, which means that it is still progressive in real terms. This is because the distribution of in-kind transfers in tertiary education is less unequally distributed than pre-tax-andtransfer incomes, so tertiary education still helps to reduce inequality.

Direct taxes are mostly paid by richer population groups and have an equalizing effect. Concentration coefficients of the personal income tax and social security contribution are positive, and their Kakwani index is always positive indicating these are progressive interventions both in relative and absolute terms. The exception to note is deductions to personal income tax (i.e., payments for tertiary education and SSC) which would be regressive in relative terms if evaluated at disposable income. This is because, given the concentration of larger SSC and tertiary education payments at the top of the distribution, these deductions favor rich proportionately more than the poor.

Value added and excise taxes, on the other hand, are regressive. The concentration coefficients are positive because consumption levels are larger in absolute terms among the rich and middle classes, thus, they pay more in VAT and excises. But Kakwani indexes are negative at all income definitions, which means that these taxes have a dis-equalizing effect because their burden is proportionately larger among the poor than among the non-poor.

Indirect subsidies, namely regulated tariffs for mortgages interest, electricity and central heating have disparate distributional impacts. The subsidies to electricity are almost neutral in absolute terms (the concentration coefficient is closest to zero), meaning all population groups receive a similar share of total subsidies. The Kakwani is always positive, indicating its effect is still progressive helping the poor to afford electricity. On the other hand, regulated central heating tariffs and subsidized mortgage interest rates have high concentration coefficients and negative Kakwani indexes. In the case of the former, its concentration coefficient is even higher that of 13 MONGOLIA Distributional impact of taxes and transfers / May 2018