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Social Spending, Taxes and Income Redistribution in Uruguay

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Author Info

  • Marisa Bucheli

    ()
    (Economics Department, Universidad de la Republica, Uruguay)

  • Nora Lustig

    ()
    (Department of Economics, Tulane University)

  • Maximo Rossi

    ()
    (Economics Department, Universidad de la Republica, Uruguay)

  • Florencia Amabile

    ()
    (Economics Department, Universidad de la Republica, Uruguay)

Abstract

We apply a standard tax and benefit incidence analysis to estimate the impact on inequality and poverty of direct taxes, indirect taxes and subsidies, and social spending (cash and food transfers and in-kind transfers in education and health). The extent of inequality reduction induced by direct taxes and transfers is rather small (2 percentage points on average) especially when compared with that found in Western Europe (15 percentage points on average). What prevents Argentina, Bolivia and Brazil from achieving similar reductions in inequality is not the lack of revenues but the fact that they spend less on cash transfers-especially transfers that are progressive in absolute terms--as a share of GDP. Indirect taxes result in that net contributors to the fiscal system start at the fourth, third and even second decile on average, depending on the country. When in-kind transfers in education and health are added, however, the bottom six deciles are net recipients. The impact of transfers on inequality and poverty reduction could be higher if spending on direct cash transfers that are progressive in absolute terms is increased, leakages to the nonpoor are reduced and coverage of the extreme poor by direct transfer programs is expanded.

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File URL: http://econ.tulane.edu/RePEc/pdf/tul1217.pdf
File Function: First Version, August 2012
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Bibliographic Info

Paper provided by Tulane University, Department of Economics in its series Working Papers with number 1217.

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Length: 39 pages
Date of creation: Aug 2012
Date of revision:
Handle: RePEc:tul:wpaper:1217

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Keywords: poverty; inequality; Uruguay; social spending;

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References

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  1. Nora Lustig & George Gray Molina & Sean Higgins & Miguel Jaramillo & Wilson Jimenez & Veronica Paz & Claudiney Pereira & Carola Pessino & John Scott & Ernesto Yanez, 2012. "The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico and Peru: A Synthesis of Results," Working Papers 1216, Tulane University, Department of Economics.
  2. Nora Lustig & Carola Pessino & John Scott, 2013. "The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico, Peru and Uruguay: An Overview," Working Papers 1313, Tulane University, Department of Economics.
  3. Verónica Amarante & Marisa Bucheli & Cecilia Olivieri & Ivone Perazzo, 2011. "Distributive impacts of alternative tax structures. The case of Uruguay," Documentos de Trabajo (working papers) 0911, Department of Economics - dECON.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Social Spending, Taxes and Income Redistribution in Uruguay
    by maximorossi in NEP-LTV blog on 2013-10-24 17:00:19
  2. Social spending, taxes and income redistribution in Uruguay
    by maximorossi in NEP-LTV blog on 2013-03-14 18:31:17
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Cited by:
  1. Nora Lustig & Carola Pessino & John Scott, 2013. "The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico, Peru and Uruguay: An Overview," Working Papers 1313, Tulane University, Department of Economics.
  2. Sara Torregrosa Hetland, 2014. "A fiscal revolution? Progressivity in the Spanish tax system, 1960-1990," Working Papers 2014/8, Institut d'Economia de Barcelona (IEB).
  3. Nora Lustig & Carola Pessino, 2012. "Social Spending and Income Redistribution in Argentina During the 2000s: the Rising Role of Noncontributory Pensions," CEMA Working Papers: Serie Documentos de Trabajo. 499, Universidad del CEMA.
  4. Sean Higgins & Nora Lustig & Julio Ramirez & Billy Swanson, 2013. "Social Spending, Taxes and Income Redistribution in Paraguay," Working Papers 1311, Tulane University, Department of Economics.

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