a _monetary income_ definition, which is composed of wages and salaries (monetary and in-kind), earnings from self-employment, self-provision of goods produced by the household, rents, interest, dividends, retirements, pensions, private transfers, and public monetary transfers. In the case of poverty, the measurement is based on a _total income_ definition, which is equivalent to monetary income plus imputed rent. It is important to highlight that the methodology for measuring income changed in 2013 and that such new approach is the one employed in this paper. Specifically, household income is no longer adjusted to national accounts, and the new estimation of the imputed rent considers not only owneroccupied dwellings, but also dwellings which were donated, given as work benefit, or dwellings in usufruct.<sup>12</sup> This paper exploits the 2013 National Socioeconomic Characterization Survey (CASEN) carried out by the Ministry of Social Development, which is a nationally representative sample collecting detailed information on household incomes, as well as on individual and dwelling characteristics. This survey is employed as the primary source of data in the incidence analysis as it is the official data set to measure the levels of poverty and income inequality in Chile. Since the CASEN does not collect information on household spending, the Family Budget Survey (EPF) 2011-2012 is employed as a secondary source to estimate indirect taxes on household consumption. This survey was carried out by the National Institute of Statistics and is aimed at identifying the structure and characteristics of final consumption of urban households in the regional capitals of the country. In addition, the analysis exploits official data on government revenues and expenditures from the 2013 executed budgets reports published by the Ministry of Finance’s Budget Office, the Ministry of Social Development, the National Institute of Statistics, and the National Audit Office.

In order to assess the distributional effects of fiscal interventions, the core building block of the fiscal incidence analysis is the definition and construction of the income concepts using the previous data sources (Figure 1). The allocation of fiscal interventions to individuals in the CASEN, depending on the income concept, is based on the following methods: _direct identification_ , when the survey contains information on who receives (pays) benefits (taxes), as well as the amount received (paid); _imputation_ , when the survey informs who receives (pays) benefits (taxes), but the amount received (paid) is retrieved from administrative records or program (tax) rules; _simulation_ , when neither direct identification nor imputation can be used, so that the beneficiaries (taxpayers) and the amount received (paid) is simulated based on the program (tax) rules; and imputation based on _secondary sources_ .<sup>13</sup> The income reported in the CASEN is the income after direct taxes and social contributions, which is equivalent to the _net market income_ concept —composed of wages and salaries from the formal and informal sectors, income from capital, private transfers such as remittances and alimonies, pensions, and imputed rent— and therefore the baseline for constructing the other income concepts. In order to construct _market income_ , a “reverse engineering” process from net market income is implemented by simulating and adding direct taxes and social contributions based on fiscal rules.

> 12 The official methodology for the measurement of poverty also changed. The new method incorporated new poverty lines based on updated values of both basic-food and basic non-food baskets, equated the value of the poverty lines between urban and rural areas, and adjusted the poverty lines based on equivalence scales.

> 13 For a detailed description of these and other allocation methods, see Higgins and Lustig (2017).

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