Abstract
Intergovernmental transfers are central to fiscal federalism, fostering territorial equity across regions with diverse socio-economic conditions. This paper examines Uruguay, where transfers remain partly based on a composite index created more than two decades ago using a limited set of indicators. Using recent census and administrative data, we reassess the statutory allocation formula and evaluate an alternative multidimensional framework based on Principal Component and Factor Analysis. The results show that updating the existing formula generates significant reallocations, while the expanded indicator set and data-driven weighting methodology produce even larger redistributive effects, improving the equalization capacity of the transfer system.
Keywords: Fiscal federalism, Intergovernmental transfers, Fiscal equalization, Composite indicators.
JEL Classification: H77, H71, C38, R51.
