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Cash Transfers and Poverty Reduction in Chile

By all accounts, poverty in Chile has declined dramatically over the last 20 years, with the nacional headcount ratio declining from nearly 40% in 1987 to below 14% in 2006. Due to data limitations, most research on poverty in Chile has focused on national and regional estimates, yet recent improvements in poverty mapping methodologies now enable the analysis of poverty at the sub-regional level. In this paper, we employ these methodologies to assess the impact of cash transfers on poverty rates at the county level. We find that transfers significantly reduce the incidence of poverty and that estimated headcount ratios fall by between 5% and 68%. To better understand variation in the effectiveness of transfers in reducing poverty at the local level, we also explore the interplay between transfers and geography. We find that the greatest reductions in poverty at the county level occur in rural households and that topography influences the effectiveness of transfers in some areas. Taken together, these findings suggest that targeting at low levels of aggregation can help to deliver further reductions in poverty.

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Paper provided by Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines in its series ILADES-Georgetown University Working Papers with number inv187.

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Length: 35 pages
Date of creation: Aug 2007
Date of revision:
Handle: RePEc:ila:ilades:inv187
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  1. Ravallion, Martin, 1997. "Can high-inequality developing countries escape absolute poverty?," Policy Research Working Paper Series 1775, The World Bank.
  2. Chris Elbers & Jean O. Lanjouw & Peter Lanjouw, 2003. "Micro--Level Estimation of Poverty and Inequality," Econometrica, Econometric Society, vol. 71(1), pages 355-364, January.
  3. Kraay, Aart, 2006. "When is growth pro-poor? Evidence from a panel of countries," Journal of Development Economics, Elsevier, vol. 80(1), pages 198-227, June.
  4. Mark D. Partridge & Dan S. Rickman, 2007. "Distance from Urban Agglomeration Economies and Rural Poverty," Economics Working Paper Series 0705, Oklahoma State University, Department of Economics and Legal Studies in Business.
  5. Dan Rickman, 1998. "The causes of regional variation in U.S. poverty: A cross-county analysis," ERSA conference papers ersa98p13, European Regional Science Association.
  6. Besley, Timothy & Kanbur, Ravi, 1990. "The principles of targeting," Policy Research Working Paper Series 385, The World Bank.
  7. Schady, Norbert R., 2000. "Picking the poor : indicators for geographic targeting in Peru," Policy Research Working Paper Series 2477, The World Bank.
  8. Dante Contreras & Osvaldo Larrañaga, 1999. "Los activos y recursos de la población pobre en América Latina: El caso de Chile," IDB Publications (Working Papers) 7598, Inter-American Development Bank.
  9. Bigman, David, et al, 2000. "Community Targeting for Poverty Reduction in Burkina Faso," World Bank Economic Review, World Bank Group, vol. 14(1), pages 167-93, January.
  10. Claudio Agostini & Philip H. Brown & Diana Paola Góngora, 2008. "Nota Técnica Distribución espacial de la pobreza en Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 35(1 Year 20), pages 79-110, June.
  11. Galasso, Emanuela & Ravallion, Martin, 2005. "Decentralized targeting of an antipoverty program," Journal of Public Economics, Elsevier, vol. 89(4), pages 705-727, April.
  12. Dante Contreras & Osvaldo Larrañaga & Julie Litchfield, 2001. "Poverty and Income Distribution in Chile: 1987-1998 New Evidence," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 38(114), pages 191-208.
  13. Demombynes, Gabriel & Ozler, Berk, 2005. "Crime and local inequality in South Africa," Journal of Development Economics, Elsevier, vol. 76(2), pages 265-292, April.
  14. Claudio Agostini & Phillip Brown, 2007. "Desigualdad geográfica en Chile," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 22(1), pages 3-33, June.
  15. Contreras, Dante & Larrañaga, Osvaldo, 1999. "Activos y recursos de la población pobre en Chile," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(263), pages 459-500, julio-sep.
  16. Baker, Judy L. & Grosh, Margaret E., 1994. "Poverty reduction through geographic targeting: How well does it work?," World Development, Elsevier, vol. 22(7), pages 983-995, July.
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