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Social Spending, Taxes and Income Redistribution in Uruguay

Marisa Bucheli (), Nora Lustig (), Maximo Rossi () and Florencia Amábile

No 1217, Working Papers from Tulane University, Department of Economics

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.

Keywords: poverty; inequality; Uruguay; social spending (search for similar items in EconPapers)
JEL-codes: I3 H2 H (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lam, nep-ltv and nep-pbe
Date: 2012-08
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http://econ.tulane.edu/RePEc/pdf/tul1217.pdf First Version, August 2012 (application/pdf)

Related works:
Journal Article: Social Spending, Taxes, and Income Redistribution in Uruguay (2014) Downloads
Working Paper: Social spending, taxes and income redistribution in Uruguay (2013) Downloads
Working Paper: Social Spending, Taxes and Income Redistribution in Uruguay (2012) Downloads
Working Paper: Social Spending, Taxes and Income Redistribution in Uruguay (2012) Downloads
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