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Subsidies in Chilean Public Utilities

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  • Pablo Serra

Abstract

This paper makes an analysis of subsidies in Chile's public utilities. Rates rebalancing have practically eliminated cross subsidies, and current subsidy programs are funded from the national budget. Over the last decade in particular, significant efforts have been made to extend public services to rural populations, and a consumption subsidy for potable water currently benefits 17% of the population. The Chilean experience shows it is possible to design subsidies targeted to the poor that do not cause deadweight losses, and at relatively low cost to the State. The elimination of cross subsidies has facilitated competition in some public services. Moreover, putting rural infrastructure projects out to public tender, whenever possible, has made it possible to substantially reduce government expenditure.

Suggested Citation

  • Pablo Serra, 2000. "Subsidies in Chilean Public Utilities," Documentos de Trabajo 70, Centro de Economía Aplicada, Universidad de Chile.
    • Handle: RePEc:edj:ceauch:70
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    1. Martin S. Feldstein, 1972. "Equity and Efficiency in Public Sector Pricing: The Optimal Two-Part Tariff," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 86(2), pages 175-187.
    2. Andres Gomez-Lobo, 1996. "The welfare consequences of tariff rebalancing in the domestic gas market," Fiscal Studies, Institute for Fiscal Studies, vol. 17(4), pages 49-65, November.
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    1. Estache, Antonio & Gomez-Lobo, Andres & Leipziger, Danny, 2000. "Utility privatization and the needs of the poor in Latin America - Have we learned enough to get it right?," Policy Research Working Paper Series 2407, The World Bank.
    2. Michel Noel & W. Jan Brzeski, 2005. "Mobilizing Private Finance for Local Infrastructure in Europe and Central Asia : An Alternative Public Private Partnership Framework," World Bank Publications - Books, The World Bank Group, number 7333, December.
    3. World Bank, 2004. "Chile - Rural Infrastructure in Chile : Enhancing Efficiency and Sustainability," World Bank Publications - Reports 14371, The World Bank Group.

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