From housing gains to pension losses: Micro-macro integration to reveal wealth inequality dynamics in Chile

This paper examines the levels and dynamics of wealth inequality in Chile between 2007 and 2021, in a context where the private pension system is mandatory and government housing policies are centered on private ownership. We focus on two major macroeconomic events: the sharp increase in housing prices following the introduction of a value-added tax on new dwellings in 2016 and the large-scale liquidation of pension assets through early withdrawals during the recent pandemic. To do so, we construct a micro–macro consistent wealth distribution by extending existing methodologies to integrate administrative pension fund balances into household wealth surveys using machine learning techniques. Our results reveal pronounced wealth concentration: the top 1% hold roughly one-third of total private wealth—levels comparable to those observed in the United States—driven by their disproportionate ownership of financial assets. By contrast, the bottom 50% hold 7–9%, primarily through housing and pension assets, shares that exceed those reported in most European countries. We also document a modest decline in wealth inequality over the period, particularly after 2016. A counterfactual analysis suggests that this decline reflects the interaction of two opposing forces: housing appreciation, which predominantly benefited the bottom 90% of households, and pension withdrawals, which reduced wealth across the distribution while relatively increasing inequality. Our findings on levels, trends, and counterfactuals are robust across alternative methodological specifications.