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The effect of administrative divisions on the distribution of individual income in the new territories of Chile

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  • Herrera, Roberto
  • Pino, Gabriel

Abstract

Developing countries often subdivide territory as a means to address excessive centralization; however, there is no existing empirical evidence to support this tool as an effective policy in increasing the living standards of residents. We focus on Chile and analyze the impact of a change in the Administrative Division on income distribution via two regions created in 2007 (Los Ríos, Arica and Parinacota). This is done via a multilevel structured additive regression (STAR) model between 2003 and 2011. Our results indicate an increase in the mean, median, and mode of individual income in the post-treatment period in the region of Los Ríos versus individuals in unaltered regions. However, we do not observe beneficial effects in the income distribution for Arica and Parinacota. The effect from subdividing territory is therefore not transversal but can depend on the quality of (and the relationship between) the regional and municipal governments as well as the initial socioeconomic and demographic conditions of each territory.

Suggested Citation

  • Herrera, Roberto & Pino, Gabriel, 2023. "The effect of administrative divisions on the distribution of individual income in the new territories of Chile," World Development, Elsevier, vol. 171(C).
    • Handle: RePEc:eee:wdevel:v:171:y:2023:i:c:s0305750x23001638
    DOI: 10.1016/j.worlddev.2023.106345
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