Cash transfers in Latin America: effects on poverty and redistribution

We present comparative evidence for eight Latin American countries regarding the design and effects of cash transfers (CTs). On the basis of household survey data, we analyze their coverage, importance in household income, and effects on poverty reduction and income redistribution. We present a static microsimulation to analyze the potential impacts of alternative program designs, including perfect targeting and higher budgets. Our results illustrate wide variation in terms of design, coverage, and importance in household income. CTs account for a significant portion of household income in lower deciles. Nonetheless, their effects in terms of reducing the incidence, intensity, and severity of poverty are moderate at best, and although their progressivity is high, their redistributive impact is limited. These results are mainly explained by the meager resources involved. Even under perfect targeting, the budgets allocated would be insufficient to achieve full coverage among households in the lowest part of the income distribution

Cash transfers in Latin America: Effects on poverty and redistribution

In this paper, we present comparative evidence for eight Latin American countries regarding design and effects of cash transfers (CTs). On the basis of household survey data, we analyse their coverage, importance in household income, and effects on poverty reduction and income redistribution. We also present a static microsimulation to analyse the potential impacts of alternative programme designs including perfect targeting and higher budgets. Our results illustrate the wide variation of these interventions in terms of their design, coverage, and importance in household income. CTs account for a significant portion of household income in lower deciles. In spite of this, their effects in terms of reductions in the incidence, intensity, and severity of poverty are, in the best of cases, moderate and, although their progressivity is high, their redistributive impact is limited. These results are mainly explained by the meager resources involved. Even under perfect targeting, the budgets allocated to transfer programs in these countries would be insufficient to achieve full coverage in the lowest part of the income distribution

Do Cash Transfers Improve Birth Outcomes? Evidence from Matched Vital Statistics, Social Security and Program Data

There is limited empirical evidence on whether unrestricted cash social assistance to poor pregnant women improves children’s birth outcomes. Using program administrative micro-data matched to longitudinal vital statistics on the universe of births in Uruguay, we estimate that participation in a generous cash transfer program led to a sizeable 15% reduction in the incidence of low birthweight. Improvements in mother nutrition and a fall in labor supply, out-of-wedlock births and mother’s smoking all appear to contribute to the effect. We conclude that, by improving child health, unrestricted unconditional cash transfers may help break the cycle of intergenerational poverty.

Do Cash Transfers Improve Birth Outcomes? Evidence from Matched Vital Statistics, Social Security and Program Data

There is limited empirical evidence on whether unrestricted cash social assistance to poor pregnant women improves children's birth outcomes. Using program administrative micro-data matched to longitudinal vital statistics on the universe of births in Uruguay, we estimate that participation in a generous cash transfer program led to a sizeable 15% reduction in the incidence of low birthweight. Improvements in mother nutrition and a fall in labor supply, out-of-wedlock births and mother's smoking all appear to contribute to the effect. We conclude that, by improving child health, unrestricted unconditional cash transfers may help break the cycle of intergenerational poverty.Poverty relief program, maternal health, cash transfers, social assistance, Uruguay, birth outcomes,Low birthweight, Cash transfer program, Nutrition

Distributive impacts of alternative tax structures. The case of Uruguay

This article considers the distributional impact of different changes in Uruguayan tax system, using a static micro-simulation framework based on the combination of data from household and expenditure surveys. On the indirect taxes side, we consider two alternatives that imply the same reduction in tax revenue: a general reduction of 2 points in the VAT basic rate, and a selective reduction in the VAT rate applied to specific goods that make up a large share of consumption of low income population. In relation to direct taxes, we consider the effects of increasing the upper limit of the tax free zone of the labor component of the dual income tax. We analyze separately the impact of each of these changes, and we also simulate a joint scenario including changes in direct and indirect taxes. Our results indicate that redistribution through the analyzed modifications in direct and indirect taxes in Uruguay is limited.Retail; fiscal redistribution, income inequality, taxes

Redistributive effects of indirect taxes: comparing arithmetical and behavioral simulations in Uruguay

In this brief paper we compare the redistributive effect of a VAT reform using an arithmetical and a behavioral microsimulation model. We analyze the effects of the elimination of the VAT for a basket of goods which is intensively consumed by the poorest population. Our microsimulations are based on data from the expenditure survey. The behavioral model uses the Quadratic Almost Ideal Demand System (QUAIDS) proposed by Banks et al (1997). Our results indicate that the change in the VAT implies a redistributive effect of small magnitude. The comparison of redistributive effects under the arithmetic and the behavioral simulation reveals that they are very similar.fiscal redistribution, income inequality, taxes

Income inequality in Latin America: Data challenges and availability from a comparative perspective

Includes bibliographyI. Factor income shares.-- II. Inequality measurement using household surveys.-- III. Data from fiscal administrations.-- IV. Final comments

Decomposing inequality changes in Uruguay: the role of formalization in the labor market

During the first decade of the twentieth century, the Uruguayan labor market showed a significant decline in wage inequality and in the incidence of labor informality, while similar changes also took place in other Latin American countries. These trends were observed in a period of strong economic dynamism. Most extended explanations for this declining inequality in the region have been centered on falling returns to education. The main goal of this paper is to present new evidence on the relation between informality and wage inequality through a RIF-based regression decomposition analysis which, besides confirming the relevant role of education, shows that the process of labor market formalization also played a significant role in the reduction of inequality in Uruguay, mainly through a price effect

National Care System in Uruguay: Who benefits and who pays?

In this paper, we analyse two specific policies that make up the National Care System, a social policy being implemented in Uruguay. Through the calibration of a static tax benefit model, we estimate the distributive impact of the expansion of childcare services and home-based care for dependent elderly, both financed through a progressive direct tax on income. We discuss the importance of identifying who benefits from these services, and show that, in the Uruguayan case, the redistributive impact is very limited. Even if the benefits are significant for individual households, the overall impact is weak because the number of beneficiaries is small