Abstract
The aim of this study is to analyze the effect of fiscal policy by race, disaggregating to consider Uruguayans with primarily European, African and indigenous ancestry. We perform an incidence analysis, an estimation of the effect of fiscal policy on the poverty exit rate and an assessment of the impact on the average ethno-racial gaps. The findings support the idea that fiscal policy reduces (but does not eliminate) ethnic gaps. This result is led by health care and educational transfers, and to a lesser degree by direct transfers. We do not consider quality issues with public services, which may affect the estimated narrowing of gaps. Finally, we find that Afro-descendants and indigenous individuals do not capture the full potential of education transfers because of their high drop-out rate.
Highlights
Latin America has a racially and ethnically heterogeneous population composed mainly of indigenous people, whites (European ancestry) and Afro-descendant people
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In this study we present an incidence analysis of taxes and social spending and an assessment of their impact on poverty and average gaps between ethno-racial groups (Afrodescendants, indigenous people and whites) in Uruguay
Summary
Latin America has a racially and ethnically heterogeneous population composed mainly of indigenous people, whites (European ancestry) and Afro-descendant people. The aim of this paper is to analyze the effect of taxes, direct transfers (in-cash benefits and food transfers), health care (public provision and private-sector subsidies) and public educational services on closing ethno-racial gaps. To solve the first problem we use a cost of production approach: the transfers of educational and health services are equal to the per beneficiary public spending, estimated on the basis of administrative data. This approach has been criticized because it does not necessarily reflect the value of the service for the individual. Income was deflated by the Consumer Price Index (INE 2014).
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