Fiscal Policy and Equality of Opportunity in Uruguay

According to the standard indicators of distributive effect, Uruguayan fiscal policy (in particular, social spending) is progressive. The aim of this paper is to compare this result with the conclusions derived from the perspective of equality of opportunity. Under this view, fiscal policy should equalize not the overall income but eliminate the effect of factors beyond the responsibility of individuals (circumstances). To assess the distributive effect of fiscal policy we calculate the Gini index for different income concepts which take into account different programs of the tax-benefit system. Then, we calculate the equality of opportunity for each income concept. Circumstances identified in this paper are the level of education attained by parents and self-reported ethnicity. To analyze the robustness of the results, we calculate several measures used in the empirical literature of equality of opportunities. Though according to the welfarist analysis we conclude that the tax-benefit system has an equalizing effect, we cannot conclude that it compensates the disadvantages due to circumstances.