Abstract

FERRANDO, Mery; PEREZ MUNOZ, Cristian  and  SALAS, Gonzalo. Negative income Tax in Uruguay: An alternative redistribution policy?. Desarro. soc. [online]. 2012, n.70, pp.151-185. ISSN 0120-3584.

In this research we evaluate an alternative redistributive scheme for Uruguay. Specifically, we analyze the impacts on equity and efficiency of substituting the new conditional cash transfer program (Asignaciones Familiares AFAM) and direct taxes (personal income tax IRFP) by a negative income tax (INR), holding fiscal budget constant. Using microsimulations that incorporate behavioral changes, we analyze the effects of this policy change on labor supply, poverty levels and income distribution. The results show that the introduction of an INR, as designed in this study, would have a negative impact on income distribution with respect to the current scheme. Moreover, in terms of efficiency, the policy change would have practically no impact on labor supply.

Keywords : Negative income tax; labor supply; income distribution; poverty, Uruguay.

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