Lifetime Inequality Measures For An Emerging Economy: The Case of Chile

Cross-section and lifetime measures of inequality are different. While the latter reflects long run resources available to individuals, the former does not. This emphasizes the dynamic dimension of inequality. Many studies have analyzed and compared economies using this lifetime perspective, however, they all focus on the United States, Canada or Europe. Since the literature is scarce for emerging economies, this paper seeks to fill this gap focusing on the analysis of lifetime inequality for an emerging economy using a search-theoretic framework. The model, which is structurally estimated with Chilean data, uses career simulations to construct lifetime measures of inequality. A set of experiments are also performed to isolate the mobility and distribution effects on inequality, the marginal effect on inequality of individual parameters, and the importance of the different ages. Results indicate that inequality is not only high in a cross-section perspective, but also in a lifetime perspective. Low mobility is the main source of lifetime inequality in the Chilean labor market being the older workers who experience the lowest degree of mobility. Finally, regulation of the labor market is important because it affects the degree of mobility in the labor market.