Income Distribution and Social Programs

Income Distribution and Social Programs

Latin America has traditionally had one the most unequal income distributions in the world. Chile has not been an exception to this rule. Although data are scarce, existing evidence suggests that during the years of military rule income inequality increased significantly in Chile. It has been estimated that in 1985 about 25 percent of households lived in extreme poverty, and that 45 percent of households lived below the poverty line. During the 1990-93 period, the incidence of poverty declined substantially. In late 1993, the Ministry of Planning and Cooperation estimated that between 1990 and 1993 more than 1.3 million people moved out of poverty. This was the result of a combination of factors: the rapid rate of growth experienced by the economy; and the implementation of social programs aimed at to the poorest groups in society.

The emphasis on social programs aimed at certain groups began in the mid-1970s. This approach seeks to deliver social programs directly to the poor, avoiding leakages to middle- and upper-income groups. These programs have been largely successful. It has been reported, for example, that 90 percent of the food distributed through the preschool nutritional programs went to the poorest three deciles of the population in the mid-1980s. Moreover, more than 80 percent of the food has reached the rural poor. Since the basic housing program was reformed in the early 1980s, more than 50 percent of the subsidies have been reaching the poorest three deciles of the population. In 1969, before the system was reformed, only 20 percent of subsidies were received by the poorest 30 percent of the population.

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