For instance, in Georgia, a country with a similar Gini coefficient for market income plus pensions (0.483) as Chile’s (0.494), the redistributive effect reaches 18.4 percent after deducting (adding) direct taxes (transfers) from/to disposable income, placing the Gini coefficient at 0.349. The magnitude of the redistributive effect is also similar in Poland (17.1 percent), although this country exhibits a Gini coefficient for market income plus pensions significantly lower (0.410). When social spending on education and health is considered, the inequality-reducing effect in Chile (15 percent) —relative to market income plus pensions— surpasses that of Armenia (11.4 percent) and levels that of the Russian Federation (15.6 percent), but it remains well below the effect found in Georgia (19.3 percent) and Poland (31.7 percent) (it is worth noting that when moving from disposable to consumable income —i.e., when considering indirect taxes and subsidies— only Chile exhibits a decline in the Gini coefficient, which is the result of the aforesaid Lambert’s conundrum).

Regarding the influence of direct transfers on poverty, Figure 14 shows that they can reduce the incidence of poverty in Chile by 41.2 percent with respect to the market income plus pensions concept, a change that is similar to that observed in Uruguay (42 percent) and threefold the regional average (12.6 percent). The intervention of indirect taxes and subsidies in Chile halves the magnitude of such reduction (24.2 percent), although it remains large enough to position Chile as the best performer among the Latin American countries with a comparable assessment. In startling contrast, in countries like Bolivia, Brazil, Costa Rica, Dominican Republic and Guatemala the effect of indirect taxes and subsidies on poverty more than compensates the gains from direct transfers.

**Figure 14: Poverty-reducing effects in selected Latin American countries**

<!-- Start of picture text --> Guatemala Colombia Dom. Rep. Bolivia Mexico Costa Rica Uruguay<br>(2011) (2010) Peru (2009) (2013) (2009) (2010) Brazil (2009) (2010) Chile (2013) (2009) Average<br>20%<br>10% 8.1%<br>4.1% 0.4% 1.9% 4.4% 2.8%<br>0%<br>-0.4% -2.1%<br>-2.3% -2.7% -2.9% -3.5% -3.0%<br>-10% -5.6% -6.2% -8.5%<br>-13.9% -12.6%<br>-20%<br>-21.8%<br>-24.2%<br>-30%<br>-40%<br>-41.2% -42.0%<br>-50%<br>Market income plus pensions to disposable income Market income plus pensions to consumable income<br>Percent changes<br><!-- End of picture text --> _Source_ : Author’s elaboration based on the following works: Bolivia (Paz Arauco et al., 2014); Brazil (Higgins and Pereira, 2014); Chile (Martinez-Aguilar and Ortiz-Juarez, 2016); Colombia (Melendez and Martinez, 2015); Costa Rica (Sauma and Trejos, 2014); Dominican Republic (Aristy-Escuder et al., 2016); Guatemala (Cabrera and Moran, 2016); Mexico (Scott, 2014); Peru (Jaramillo, 2014); and Uruguay (Bucheli et al., 2014). _Notes_ : The incidence of poverty is measured according to the $4/day poverty line. The year for which the country analysis was conducted is shown in parentheses in each bar of the graph. The average is the simple mean of the percent changes by country. The figures shown in the graph may slightly differ from those originally published in the works cited due to recent updates of the CEQ methodology.

# **5. SUMMING UP**

The results from the fiscal incidence analysis presented in this paper indicate, in general, that fiscal interventions in Chile exert a positive net effect in reducing poverty and inequality, and favor upward 23