Fiscal disparities in Uruguay’s regions: The role of a new systemof intergovernmental equalization transfers

Abstract

This article conducts an empirical analysis of the role of intergovernmental transfers in a group of regions (departments) in Uruguay during the period 2006–2014. It examines the structure and evolution of regional fiscal disparities and the equalizing effects of the current transfer system. It then proposes an innovative methodology for simulating the effects of a new system of equalization transfers. The main finding is that implementing this new system would help to consolidate greater territorial fiscal homogeneity in Uruguay.