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How to obtain this publication | Additional information
The following is the Executive summary of the OECD assessment and recommendations, taken from the Economic survey of Chile, published on 26 November 2007.
Chile remains a strong performer. Exemplary macroeconomic management continues to deliver robust public finances and low, albeit recently rising, inflation. Structural reform is ongoing, ranging from improvements in regulation to a strengthening of social protection, including through much-needed further pension reform. Growth is on the rise, contributing to further reducing Chile’s still sizeable income gap relative to the OECD area, reducing poverty and improving income distribution. Sustaining productivity-driven growth over the long term through continued structural reform initiatives is Chile’s overarching policy challenge.
Macroeconomic management has been laudable and is building on past achievements. The policy setting combining rules-based fiscal management, inflation targeting and a flexible exchange rate is serving the economy well in a period of unprecedented strength in the price of copper. A Fiscal Responsibility Law was approved in 2006 and tightened the fiscal framework further. The structural budget surplus target will be reduced from 2008 without endangering macroeconomic equilibrium in the short run. The pension reform that is under discussion is well thought out, but its effect on retirement saving will depend to a large extent on the strength of the incentives to be introduced by the reform.
The planned hike in government-funded social services needs to be cost-effective to yield commensurate improvements in social outcomes. Comfortable public finances have laid the groundwork for further policy action to enhance social development, especially in the areas of education, health care and housing. There remains much room for raising efficiency in service delivery to the level of the best performers in the OECD area, especially in education. To this end, steps need to be taken to narrow the disparities in performance that currently exist among students with varying socio-economic backgrounds, to improve risk-sharing among health insurers and to continue to close the housing deficit facing the poorest segments of society.
There is much scope for tackling informality in the labour market and in the business sector. Enforcement has been stepped up, encouraging compliance with the tax code and business regulations. But product market regulations can be made less burdensome on enterprises, especially SMEs, and employment protection legislation (at least for indefinite contracts) more flexible. Low human capital remains an important obstacle to reducing labour informality. Therefore, policy initiatives to improve the skills of the labour force through the education system, and labour training and skill certification would also contribute to reducing informality in the future. It will be important to assess the beneficial effects of more comprehensive social protection (and the costs it entails) on the incentives for formality facing those who might otherwise work informally.
Efforts should be made to raise labour force participation further, especially among females and youths. This is important for lifting the economy’s long-term growth potential, reducing poverty and improving income distribution. Participation is low for females and is trending down for youths, due essentially to rising school enrolment. Policy action to encourage more flexible arrangements in working-time allocation and to facilitate access to affordable child care would provide an alternative for mothers with young children to reconcile household and work responsibilities. By making the hiring of youths more attractive, the subsidy programme proposed in the context of pension reform would also help to increase formal labour force participation.
How to obtain this publication
The Policy Brief (pdf format) can be downloaded in English or in Spanish. It contains the OECD assessment and recommendations.The complete edition of the Economic survey of Chile 2007 is available from:
- SourceOECD for subscribing institutions and many libraries
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OLISnet, under "Publication Locator", for government officials with accounts ( subscribe)
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Additional information
For further information please contact the Chile Desk at the OECD Economics Department at eco.survey@oecd.org. The OECD Secretariat's report was prepared by Luiz de Mello and Diego Moccero under the supervision of Peter Jarrett. Research assistance was provided by Anne Legendre.
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