© 1999 International Bank for Reconstruction and Development / The World Bank
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Calm After the Storms: Income Distribution and Welfare in Chile, 1987–94
Francisco H. G. Ferreira is with the Economics Department at the Catholic University of Rio de Janeiro, and Julie A. Litchfield is with the Economics Department at the University of Sussex. Their e-mail addresses are fferreira@econ.puc-rio.br and j.a.litchfield@sussex.ac.uk. The authors are grateful to Dante Contreras, Indermit Gill, Jesko Hentschel, Osvaldo Larranaga, Chris Scott, Tony Shorrocks, Miguel Szekely, Alberto Valdes, Michael Walton, two anonymous referees, and participants at conferences in Santiago and London for their very useful comments and contributions. The authors particularly wish to thank Iris Delgado at MIDEPLAN and Juan Carlos Feres at CEPAL for being so generous with their vast knowledge of the details of the CASEN data.
After rising during most—but not all—of the 1960–85 period, inequality in Chile seems to have stabilized since around 1987. Following the stormy period of economic and political reforms of the 1970s and 1980s, no statistically significant Lorenz dominance results could be detected since 1987. Scalar measures of inequality confirm this picture of stability, but suggest a slight change in the shape of the density function, with some compression at the bottom being "compensated for" by a stretching at the top. As inequality remained broadly stable, sustained economic growth led to substantial welfare improvements and poverty reduction, according to a range of measures and with respect to three different poverty lines. Poverty mixed stochastic dominance tests confirm this result. All of these findings are robust to different choices of equivalence scales.