POVERTY AND INCOME DISTRIBUTION IN CHILE 1987-1998.: NEW EVIDENCE

Abstract

This paper presents an update o­n the poverty and income distribution situation in Chile during the 90s. The analysis shows unambiguously that there was less poverty between 1994 and 1998 than in all earlier years, whether poverty is measured by the headcount, the poverty deficit or by any of the most sensitive poverty indices. The evidence also confirms that income inequality in Chile remains high by international standards. Nevertheless, notwithstanding the earlier observation, the overall picture o­n inequality is o­ne of a fairly stable distribution for the period as a whole, with changes in income shares being relatively small in proportion to the size of the shares themselves. In addition, this study develops and applies a methodology for the estimation of the imputed income transfers from government subsidies in health, education, and housing, for the years 1990, 1994, 1996 and 1998. The analysis has confirmed that adjustments for in-kind income transfers substantially reduce the Gini coefficient o­n income inequality. For 1998, this coefficient falls from 0.56 (unadjusted) to 0.50 (adjusted) and the ratio of the highest (richest) to the lowest (poorest) quintile falls from 20 to 11. These results suggest that social policies in Chile have had a significant impact in reducing income inequality, in spite of the fact that such policies are oriented towards poverty reduction rather than reduction in inequality per se.