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The Redistributive Impact of Public Policies in a Country With a High Level of Income Inequality: The Case of Chile

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  • Alexis Palma

Abstract

This article investigates the distributive impact of public policies in Chile. The economy of this country has expanded, incomes of many households have increased, and poverty has declined. However, the level of income inequality has stagnated at a high level and seems to be virtually unaffected by the economical and social changes experienced by the Chilean society. One finding that emerges from the literature is that although subsidies have, to some degree, played a role in the fight of poverty, their role in the reduction of income inequality is minor. Regarding taxes, several analyses have shown that it is possible to increase the distributive impact of the tax system in Chile, but this potential has not yet been exploited. This is surprising given that the tax system in place in Chile is regressive rather than progressive. Public expenditures in health and education are clearly affecting the distribution of incomes and seem to be the method chosen by Chile's policy makers to achieve a more equal society. However, this ambition seems to have been strongest in the early 1990s and in the period 2006–2010.

Suggested Citation

  • Alexis Palma, 2014. "The Redistributive Impact of Public Policies in a Country With a High Level of Income Inequality: The Case of Chile," Poverty & Public Policy, John Wiley & Sons, vol. 6(2), pages 117-134, June.
    • Handle: RePEc:wly:povpop:v:6:y:2014:i:2:p:117-134
    DOI: 10.1002/pop4.72
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    1. Vittorio Corbo & José Tessada, 2002. "Growth and Adjustment in Chile: A Look at the 1990s," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Raimundo Soto & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.),Economic Growth: Sources, Trends, and Cycles, edition 1, volume 6, chapter 14, pages 465-522, Central Bank of Chile.
    2. Engel, Eduardo M. R. A. & Galetovic, Alexander & Raddatz, Claudio E., 1999. "Taxes and income distribution in Chile: some unpleasant redistributive arithmetic," Journal of Development Economics, Elsevier, vol. 59(1), pages 155-192, June.
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