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Inequality and Poverty in Uruguay by Race: The Impact of Fiscal Policies

File Created On:
March, 2015

In Uruguay tax structure and social spending reduce inequality and poverty for society as a whole (Bucheli et al. 2013). In this study we analyze the effect of fiscal policy by race and ethnicity, disaggregating to consider whites, African descendant and indigenous descendant Uruguayans. Our paper seeks to discover whether the reduction in inequality and poverty benefits a particular ethno-racial group over others or if it affects ethno-racial groups equally. The three ethno-racial groups are equally likely to escape extreme poverty through the direct transfer system. However, the likelihood of escaping moderate poverty is lower for indigenous peoples than for the other ethno-racial groups. While the direct transfer system reduces poverty among individuals of all three groups, it does not fully achieve racial equality in terms of the incidence of poverty. When analyzing average income, the qualitative conclusions are similar. The ethno-racial gap narrows, predominantly due to in-kind transfers, but does not disappear completely.

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