New approaches to measuring economic and social well-being in Chile

Abstract

I propose three new measures of social and economic well-being using different approaches. These measures are applied to Chile using two household surveys: the Panel CASEN and the Financial Survey. First, I use an income positions persistence approach to estimate the persistence of households in different positions of the income distribution. The application of this measure enables us to understand the mechanisms that explain why those at the lower end of the income distribution have a low probability of moving up (sticky floor), and those at the higher end of the income distribution have less chance of moving down (glass floor). The results show that income mobility is particularly high for all groups in the income distribution. Second, I use a low-income dynamic approach to estimate degrees of vulnerability to poverty. This measure enables us to obtain two vulnerability lines that measure the risk of non-poor households falling into poverty in the next period. This enables the identification of three types of households: those with high, moderate and low vulnerability. The latter corresponds to the income-secure middle class. The results show that vulnerability to poverty affects a significant part of the population that exited poverty in the last decade. Third, I use a multidimensional approach to measure economic insecurity at the household level. I build an index that combines four indicators of economic insecurity that cause stress and anxiety: unexpected economic shocks, unprotected employment, over-indebtedness and asset poverty. In this way, the index offers a measure that directly relates economic uncertainty to stress due to the lack of social protection and household buffers to face an unexpected economic shock. The results show that households in the entire income distribution