www.oecd.org/eco/surveys/economic-survey-chile.htm

OECD

OECD Economics

2015 OECD ECONOMIC SURVEY OF CHILE

Bringing all Chileans on board

Santiago, 25 November 2015

2

A long period of growth has reduced poverty dramatically

Note: The poverty line for a family of four is a family income below CLP 361 311 per month, and the extreme poverty line is a family income below CLP 240 874 per month, both for the year 2013.Source: Ministerio de Desarrollo Social.

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

0

5

10

15

20

25

30

35

40

0

5

10

15

20

25

30

35

40Poverty Extreme poverty% of people % of people

3

I II III IV I II III IV I II III IV I II III IV I II III IV2013 2014 2015 2016 2017

-1

0

1

2

3

4

5

6

-1

0

1

2

3

4

5

6Chile Latin America

Growth has been resilient

Source: OECD Economic Outlook 98 database

GDP growth, Y-o-Y % change

4

The fall in copper prices has depressed investment

Source: Codelco and OECD Economic Outlook 98 database.

i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

-20-15-10

-505

101520253035

-80-60-40-20020406080100120140

Investment (lhs) Copper price (rhs)

Y-o-y % changes Y-o-y % changes

5

I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV2011 2012 2013 2014 2015 2016 2017

0

1

2

3

4

5

6

-12

-8

-4

0

4

8

12

Consumer price inflation (lhs)

Nominal effective exchange rate, chain-linked, overall weights (rhs)

Y-o-Y % changes

Exchange rate depreciation has temporarily raised inflation

Source: Central bank of Chile and OECD Economic Outlook 98 database.

Y-o-Y % changes

6

Improving opportunities for all

7

The richest 10% earn 26.5 times the income of the poorest 10%

Source: OECD, Income Distribution and Poverty Database.

Ratio of incomes of the top 10% vs. bottom 10%

DNK

CZE

FIN

SVN

ISL

SVK

BEL

NOR

SWE

DEU

CHE

NLD

AUT

LUX

HUN

POL

FRA

IRL

NZL

CAN

AUS

OECD ES

TPR

TGB

RKO

RJP

NIT

AES

PGR

CIS

RTU

RUS

AM

EX CHL

0

5

10

15

20

25

0

5

10

15

20

25ratio ratio

Growth needs to become more inclusive

8

The tax and transfer system does little to reduce income inequality

Raise tax revenues to increase social spending, and improve the redistributive impact of taxes and transfers.

KOR

CHE

ISL

SVK

SWE

DNK

NLD

NOR

CZE

NZL

JPN

AUS

SVN

CAN

FIN

BEL

DEU

EST

POL

HUN

AUT

LUX

ITA

ISR

FRA

TUR

ESP

USA

PRT

GBR

MEX

GRC

CHL

IRL

OECD

0.2

0.25

0.3

0.35

0.4

0.45

0.5

0.55

0.2

0.25

0.3

0.35

0.4

0.45

0.5

0.55Inequality before taxes and tansfers Inequality after taxes and transfers

% changes in Gini before and after taxes and transfers

Source: OECD, Income Distribution and Poverty Database.

9

Pension benefits are among the lowest in the OECD

Note: “Average” and “low” earnings levels refer to 100% AW and 50% of the AW respectively.Source: OECD, Pension at a Glance Database.

The pension system should provide better income support in retirement.

JPN

DEU

MEX US

APO

LCH

LKO

RGB

RSW

EFI

NIR

LFR

APR

TCH

EES

PES

TBE

LSV

NOE

CD NZL

ITA

LUX

SVK

CAN

NOR

AUT

GRC

ISL

HUN

CZE

AUS

TUR

NLD

ISR

DNK

0

20

40

60

80

100

120

0

20

40

60

80

100

120Low = 50% Average wageAverage = 100% Average wage

Net pension replacement rates Net pension replacement rates

10

Inequality in the labour market is also high

Share of temporary contracts

Reduce duality in the labour market between protected indefinite contracts and precarious fixed-term contracts.

EST

GBR

SVK

LUX

BEL

NOR

DNK

AUT

CZE

GRC

IRL

HUN

OECD TU

RCH

EIT

ACA

NDE

UIS

LFI

NSV

NFR

ASW

ENL

DPR

TKO

RES

PPO

LCH

L

0

5

10

15

20

25

30

0

5

10

15

20

25

30% %

Source: OECD Employment and Labour Market Statistics 2014.

11

Reducing gender gaps is key to boost growth and reduce inequality

Source: OECD Employment and Labour Market Statistics 2014.

Further expand availability and quality of early childhood education and care.

Chile

Latin America

OECD

50 55 60 65

Labour force participation rate 2014, women aged 15-64

12

Very few women are on corporate boards

Source: World Values Survey Association.

DEU

JPN

NLD

CHL

CAN

PER

IND

IRL

EGY

ITA

ARG

TUR

MEX PO

LAU

SNZ

LGB

RBR

ACH

EPR

TGR

CLU

XDN

K

ESP

BEL

USA

FRA

SWE

NOR

0

5

10

15

20

0

5

10

15

20% %

Promote gender diversity in leadership positions in parliament and private companies.

38

13

Gender pay gap is highest for the poorest

Source: OECD calculations based on CASEN(2013).

Bring gender issues into the public debate through information campaigns.

Poorest decile 3rd decile 5th decile 7th decile Richest decile0

10

20

30

40

50

60

0

10

20

30

40

50

60% %

14

Spending on active labour market policies is low

Note: The figure for Chile does not include the recent programme MasCapaz.Source: OECD Employment and Labour Market Statistics 2014.

Increase investment on active labour market policies to help promote labour opportunities for women.

MEX US

ACH

LJP

NGB

RCZ

EKO

RSV

KNZ

LES

TIS

RPO

LCA

NNO

RAU

SHU

NSV

NCH

ELU

XDE

UIT

ASW

EAU

TPR

TFR

AFI

NBE

LNL

DIR

LDN

KES

P

0

0.5

1

1.5

2

2.5

3

3.5

4

0

0.5

1

1.5

2

2.5

3

3.5

4% of GDP % of GDP

15

Better skills for inclusive growth

16

Many students lack minimum skills

Source: OECD, PISA 2012 Database.

Ensure that schools are more responsive to vulnerable students, especially by boosting the quality of outcomes.

Undertake a skills strategy to assess labour market needs and guide training and education policies.

OECD Chile Latin America0

10

20

30

40

50

60

70Chart Title% of students with poor skills

17

A low share of students beat the socio-economic odds stacked against them

Source: OECD, PISA 2012 Database.

Improve the quality and access to pre-primary education. Implement legislation to end school selection.

CHL

ISR

GRC MEX SV

KHU

NSW

EDN

KUS

AIS

LNZ

LNO

RFR

AG

BR SVN

CZE

LUX

AUT

AUS

IRL

OEC

DIT

AES

PBE

LTU

RDE

UPR

TFI

NCA

NPO

LNL

DES

TCH

EJP

NKO

R

0

2

4

6

8

10

12

14

0

2

4

6

8

10

12

14

% of disadvantaged students with top PISA math scores

18

Education and skills improve growth

Note: The bars in Panel B refer to annual growth rates (in percentage points) once the whole labour force has reached the specific goal.Source: OECD, PISA 2012 Database and OECD (2015).

Change in annual GDP growth if universal basic skills are attained by 2030

0

0.1

0.2

0.3

0.4

0.5

0.6

0

0.1

0.2

0.3

0.4

0.5

0.6Percentage points Percentage points

19

Chile has a shortage of qualified teachers

Source: OECD, PISA 2012 Database.

Percentage of certified teachers (as reported by school principals in PISA)

Approve the legislation to strengthen teachers’ career paths.

CHL

MEX LU

XIS

RNL

DFR

AGR

CCH

EIT

ABE

L

AUT

SWE

NOR

FIN

TUR

DEU

SVK

GBR

SVN

USA

NZL

PRT

CAN

ISL

AUS

POL

IRL

KOR

JPN

ESP

0102030405060708090

100

0102030405060708090100

% %

20

Tertiary education: the poor enroll far less than the rich

Source: CASEN (2013).

Percentage of students enrolled in tertiary education by level of family income

Poorest quintile Quintile 2 Quintile 3 Quintile 4 Richest quintile0

10

20

30

40

50

60

70

80

90

100

0

10

20

30

40

50

60

70

80

90

100% %

Expand and improve income-contingent loans to finance tuition fees and help students access tertiary education.

Link funding for tertiary education to improved quality, especially for the least well-off students.

21

Boosting productivity growth

22

Boosting productivity growth is one of Chile’s foremost challenge to raise living standards

Source: UAI/CORFO (2014), Boletín trimestral Evolución de la PTF en Chile, No. 7.

Total factor productivity

Fully roll out the Productivity Agenda, to strengthen the capacity of dynamic firms to scale up and carry out innovative activities.

1993-1998 2000-2008 2010-2013-12-10

-8-6-4-202468

-12-10-8-6-4-202468

Total Fator Productivity (TFP) : AggregateTFP: Aggregate without natural resourcesTFP: Mining

Average annual % growth

Average annual % growth

23

Spending on R&D remains very low

Source: OECD Science, Technology and Industry Scoreboard 2015: Innovation for growth and society.

R&D expenditure

Increase spending on R&D to scale up and support innovative activities.

CHL

MEX AR

GZA

FGR

CSV

KPO

LTU

RRU

SLU

XES

PIT

ANZ

LPR

THU

NIR

LCA

NGB

RNO

RES

TCZ

ENL

DCH

NAU

SFR

ABE

LIS

LSV

NUS

AAU

TDE

UCH

EDN

KSW

EFI

NJP

NKO

RIS

R

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5Private Non-Profit sector Government sector Higher Education sectorBusiness Enterprise sector

OECD average

% of GDP % of GDP

24

Business regulation remains restrictive in multiple areas

Sources: OECD, Product Market Regulation Database.

Further reduce the complexity of administrative procedures for business and simplify sector-specific regulations.

Product market restrictiveness

Best 3 performers

Average OECD

Chile

0 1 2 3 4 5 6

Regulatory complexity

Barriers in network sec-tors

Startup burdens

Increasing in stringency of regulation (Index 0-6)

25

Summary

26

Main Findings

o The sound macroeconomic framework made growth more resilient than in other countries in the face of the recent fall in commodity prices.

o However, income inequality remains very high and is passed from one generation to the next, reducing opportunities to climb the social ladder.

o Chile is now reforming its tax system to make it more progressive and expand social programmes.

o Key reforms seek to reduce gender gaps and thus achieve a fairer society. o But labour market duality still results in a very unequal wages distribution.

o School enrolment is high, although the quality of education is uneven, and access to the best schools is reserved primarily for well-off families.

o The government’s education reform seeks to make schools more inclusive and reshape teacher careers.

o More investment in vocational education and training will be needed.Edu

catio

nInclusion

Macro

27

Recommendations to widen opportunities

Strengthen policies to make growth more inclusive.

Raise tax revenues to increase social spending and improve the redistributive impact of taxes and transfers.

Further expand availability and quality of early childhood education and care.

Promote gender diversity in leadership positions in parliament and private companies.

Bring gender issues in the public debate through information campaigns.

Reduce duality in the labour market between protected indefinite contracts and precarious fixed-term contracts.

The pension system should provide better income support to the retired.

28

Recommendations to improve skills

Ensure that schools are more responsive to vulnerable students, especially by boosting the quality of outcomes.

Undertake a skills strategy to assess labour market needs and guide training and education policies.

Improve the quality and access to pre-primary education.

Implement legislation to end school selection.

Approve the legislation to strengthen teachers’ career paths.

Link funding for tertiary education to improved quality, especially for the least well-off students.

29

Recommendations to boost productivity

Fully roll out the Productivity Agenda, to strengthen the capacity of dynamic firms to scale up and carry out innovative activities.

Increase spending on R&D to scale up and support innovative activities.

Further reduce the complexity of administrative procedures for business and simplify sector-specific regulations.

Pass the competition bill that strengthens sanctions for cartels, reform the merger control regime and facilitate market studies.

More Information…

www.oecd.org/eco/surveys/economic-survey-chile.htm

OECDOECD Economics

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30