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Social Spending, Taxes and Income Redistribution in Uruguay

Author

Listed:
  • 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.

Suggested Citation

  • Marisa Bucheli & Nora Lustig & Maximo Rossi & Florencia Amabile, 2012. "Social Spending, Taxes and Income Redistribution in Uruguay," Working Papers 1217, Tulane University, Department of Economics.
  • Handle: RePEc:tul:wpaper:1217
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    File URL: http://econ.tulane.edu/RePEc/pdf/tul1217.pdf
    File Function: First Version, August 2012
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    References listed on IDEAS

    as
    1. Nora Lustig & George Gray-Molina & Sean Higgins & Miguel Jaramillo & Wilson Jiménez & Veronica Paz & Claudiney Pereira & Carola Pessino & John Scott & Ernesto Yañez, 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 264, ECINEQ, Society for the Study of Economic Inequality.
    2. 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.
    3. Flaviana Palmisano & Dirk Van de gaer, 2016. "History-dependent growth incidence: a characterization and an application to the economic crisis in Italy," Oxford Economic Papers, Oxford University Press, pages 585-603.
    4. Nora Lustig & Florencia Amábile & Marisa Bucheli & George Gray Molina & Sean Higgins & Miguel Jaramillo & Wilson Jiménez Pozo & Veronica Paz Arauco & Claudiney Pereira & Carola Pessino & Máximo Rossi , 2013. "The impact of taxes and social spending on inequality and poverty in Argentina, Bolivia, Brazil, Mexico, Peru and Uruguay: An overview," Working Papers 315, ECINEQ, Society for the Study of Economic Inequality.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    poverty; inequality; Uruguay; social spending;

    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H - Public Economics

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