Calm after the storms: Income distribution and welfare in Chile, 1987-94

After rising during most-but not all-of the 1960-85 period, inequality in C hile seems to have stabilized since around 1987. Following the stormy perio d of economic and political reforms Of the 1970s and 1980s, no statisticall y significant Lorenz dominance results could be detected since 1987. Scalar measures of inequality confirm this picture of stability, but suggest a sl ight change in the shape of the density function, with some compression at the bottom being "compensated for" by a stretching at the top. As inequalit y remained broadly stable, sustained economic growth led to substantial wel fare improvements and poverty reduction, according to a range of measures a nd with respect to three different poverty lines. Poverty mixed stochastic dominance tests confirm this result. All of these findings are robust to di fferent choices of equivalence scales.