Tax-Benefit Responses in Uruguay During the COVID-19 Pandemic

Abstract We analyze the social protection policy response to COVID-19 and its impact on household incomes in Uruguay during 2020 and 2021, using static microsimulation methods. From the onset of the crisis, the Uruguayan government implemented adjustments to existing social protection policies as well as a new transfer and an emergency tax. Our results indicate that Uruguay’s enhanced social protection system prevented poverty from increasing by 2.8 and 3.7 percentage points in 2020 and 2021, respectively. The COVID-19 enhancements contributed 1.3 and 1.6 percentage points of this total protective effect. The effects were bigger among households with children. The most important instruments were unemployment insurance in 2020 and the conditional cash transfer directed at households with children in 2021. Taken together, these modifications to the social protection system prevented the Gini index from increasing by around 0.7 additional percentage points.