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Prepared by Elif Ture (WHD).
See, for example, Banerjee (2004) for the underinvestment channel, Rodrik (1999) for the social conflict and Kumhof and Rancière (2010) for the crisis channels, and Berg, Ostry and Tsangarides (2014) for the growth duration channel.
Throughout the paper, regional comparisons are made among LA6 countries, which include Brazil, Chile, Colombia, Mexico, Peru, and Uruguay.
Note that the (extreme) poverty rate increased in Chile between 2006 and 2009, from 13.7 (3.2) percent to 15.1 (3.9) percent for the first time since 1990, mostly due to the economic slowdown.
While 85 percent of household monetary income was labor income, around 13 percent of household monetary income was non-labor autonomous income, including rents, interest and dividends, pension, healthcare, and other private transfers. The remaining 2 percent of household monetary income was monetary subsidies. Total non-labor income accounted for less than 5 percentage points of the Gini index on household monetary income, which was 53 percent in 2011 (Friedman and Hofman, 2013). Note that household surveys are unable to measure capital income accurately, especially for higher income groups, due to sampling and under-reporting issues.
Other programs include, for example, housing, environment, and culture. Social protection programs include social assistance and social security transfers together with social development programs targeted at improving the living conditions of vulnerable groups.
See for more details Chile’s Tax System and Reform, by D. Rodriguez-Delgado, Selected Issues Paper.
Financial assistance for schooling covers over 90 percent of primary education and 85 percent of secondary education.
All Chilean workers and pensioners are obligated to pay 7 percent of income for health insurance, which could be public or private. For the latter, higher contributions can be paid to increase benefits.
Note that total education spending (public and private) is not low in Chile compared to the OECD (Table 10), due mostly to high private spending on tertiary education.
See Grigoli (2014) on the efficiency of public spending in Chile from a cross country perspective.