Local Distributional Effects of Government Cash Transfers in Chile

Abstract

Despite rapid economic growth and poverty reduction, inequality in Chile has remained high and remarkably constant over the last 20 years, prompting academic and public interest in the subject. Due to data limitations, however, research on inequality in Chile has concentrated on the national and regional levels. The impact of cash subsidies to poor households on local inequality is thus not well understood. Using poverty mapping methods to asses this impact, we find heterogeneity in the effectiveness of regional and municipal governments in reducing inequality via poverty-reduction transfers, suggesting that alternative targeting regimes may complement current practice in aiding the poor.