"Inclusive Development" And Income Distribution: Chile Case Study

The idea of “inclusive development” embodies the dialectical relationshipbetween economic growth and overall social development. It is a new question facedby the world in the new development era. Moreover, it is of great significance to theLatin American country, Chile. In the1970s and the1980s, under the rein of militarygovernment, the country’s economy achieved a rapid growth, but the state of incomedistribution seriously deteriorated and was hard to improve. Since1990Chile’scivilian government laid an emphasis on improving public living. As a result, theincome gap began to narrow. However, at present the Gini coefficient is still as highas above0.5, and the income distribution problem is still the major factor in Chile’ssocial exclusion. Therefore, to promote “inclusive development” along with economicgrowth and to improve income distribution is the only path to Chile’s present andfuture development.This thesis first makes a comprehensive review of Western Economics theories,especially the part about income distribution in Modern Development Economics, andsummarizes three pairs of important relationship relevant to it, i.e. growth anddistribution, efficiency and fairness, state and market. Based on this, and inconsideration of the development of income distribution theories in Latin Americancountries and the historical lessons, the thesis goes on to point out the connotation ofChile’s “inclusive development” at present is inclusive growth and distribution, whichmeans to promote social cohesion by improving income distribution. Next, the thesis,by reviewing the development and changes in Chile’s income distribution since the1970s, analyzes the strategic importance of “inclusive development” and summarizesthe major factors influencing Chile’s income distribution, which are also the path toits improvement. In the end, the thesis, from the perspective of initial distribution andsecondary distribution, analyzes the policies Chile has adopted in recent years on theabove-mentioned path to the income distribution improvement, their effect andexisting problems.Based on the analysis, the thesis reaches the following conclusions: First, thedifferent ways Chile’s military government and civilian government dealt with therelationship between growth and distribution, efficiency and fairness, and state andmarket is the main cause that has made Chile’s income distribution deteriorate first before it improves later. In future, under the strategy of inclusive development, Chileshould go on applying inclusive growth and distribution, and ensure efficiency andfairness in the phases of initial distribution and redistribution. The government shouldplay a proper role and actively take part in the regulation of the various factorsinvolved in income distribution. Second, the major factors influencing Chile’s incomedistribution, i.e. the path to its improvement, include the following: macro-economyand economic growth, production homogeneity, employment homogeneity, education,tax, and social security. Among these production and employment homogeneity is thekey factor, and initial distribution is a decisive phase. Third, Chile’s incomedistribution hasn’t seen obvious improvement since1990, which has resulted from thefact that on some of the paths to “inclusive development” no fundamental changeshave been made to the many established systems and many policies fail to achieveobvious effect, with some problems still existing.