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Concentration in settlement patterns and economic activity in Chile is high

The geographic characteristics of Chile condition a concentration of economic activities and settlement patterns in few areas. Chile’s geography, based on the presence of desert land in the north, mountainous terrain throughout the country and ice in the south, concentrates economic activities and settlement patterns in few geographic areas. Furthermore the country is experiencing a desertification of land affecting around 47.3 million hectares. Indeed, almost half of the Chilean population lives in Santiago and almost 60% in Santiago and Bio-Bio. According to the geographic concentration index, demographic concentration in Chile (61) is almost twice the OECD average (32) and is only surpassed by Iceland (62). Economic activity is also very concentrated. In fact, Chile records the highest level of concentration in GDP (52) among OECD countries.

Chile is one of three OECD countries with a higher concentration in settlement patterns than in economic activity. Typically for the OECD, economic activity tends to be more concentrated than settlement patterns due to benefits associated with economies of agglomeration and capital-intensive economic activities. Indeed, amongst 28 of the 32 OECD member countries considered, this is the case, with the exception of Australia, Canada and Chile. For the case of Chile, this largely reflects the importance of mining-intensive activities, which concentrate high-value economic activities in few regions.

Figure 1.13. Concentration in demographic and economic activity in OECD TL2 regions, 2010

Geographic concentration of population, 2010 (TL2) Geographic concentration of GDP, 2010 (TL2)

Source: OECD (2013), OECD Regional Statistics (database), http://dx.doi.org/10.1787/region-data-en, (accessed on 15 December 2013).

Figure 1.14. Ratio concentration index of GDP to population, 2010

Source: OECD (2013), OECD Regional Statistics (database), http://dx.doi.org/10.1787/region-data-en, (accessed on 15 December 2013).

Although population and economic activity in Chile remains amongst the most concentrated in OECD countries, there has been a trend toward de-concentration during the past 15 years. Settlement patterns and economic activities declined by almost one and 2.2 percentage points respectively over 1995-2011. When compared to trends in OECD member countries, in the majority, economic activity has become more concentrated over the same time period, with the exception of Australia, Austria, Canada, Chile, the Netherlands, New Zealand and the United States. Despite the gradual reduction in concentration for Chile, it still remains remarkably high.

Figure 1.15. Change in concentration in GDP and settlement patterns in Chile and OECD countries, 1995-2011

Source: OECD (2013), OECD Regional Statistics (database), http://dx.doi.org/10.1787/region-data-en, (accessed on 15 December 2013).

Inequality in Chile is amongst the highest in the OECD

Inequality among people is highly associated with inequality across space. Although the process of overall development creates regional imbalances, given that some territories have higher growth potential than others, when unbalances are excessive it might reflect that some regions and the inhabitants living in them may lack adequate access to goods and services as well as to economic opportunity. Regional policies from the old paradigm addressed these spatial imbalances through compensating mechanisms that redistributed resources. As will be discussed in Chapter 2, many OECD member countries have abandoned the use of regional polices as compensating mechanisms for a current framework that regards regional policies as a strategic tool that adapt policies and investment to the needs of each region, with the goal of facilitating the development of each place.

Among OECD member countries, territorial inequality is highly correlated with interpersonal inequality. Indeed, countries with higher levels of regional inequality also tend to have high levels of income inequality (Figure 1.16), and likewise member countries with a low level of regional inequality tend to have low levels of income inequality.

Chile records the highest level of regional inequality among OECD countries and one of the highest amongst the enhanced engagement OECD countries. When compared to OECD countries, Chile records the highest level of inequality amongst TL2 regions, excluding countries with less than four TL2 regions (Belgium, Greece, Ireland, the Netherlands, New Zealand, the Slovak Republic and Slovenia). When compared to enhanced engagement countries, only the Russian Federation and Indonesia have higher levels of regional inequality than Chile. In fact, Chile’s inequality is higher than in Columbia, Brazil, India, China and South Africa (Figure 1.17). This suggests that parts of the country, on the one hand, might suffer from unequal access to goods, services and opportunities; and on the other hand, parts of the country could be better mobilised in the overall development process. As Chapter 2 will discuss, the respective roles of urban and rural tend to change in different stages of development, with rural regions becoming more relevant as countries move into higher stages of development.

Figure 1.16. Interpersonal & geographic inequality among TL2 regions in OECD countries, 2009

Source: OECD (2013), OECD Regional Statistics (database), http://dx.doi.org/10.1787/region-data-en, and OECD Income distribution and poverty (database), www.oecd.org/els/social/inequalitv. (accessed on 15 December 2013).

Figure 1.17. Gini Index of inequality of GDP per capita across OECD and enhanced engagement countries, 2011

OECD countries* OECD and enhanced engagement countries

Note: * Countries with less than four TL2 regions are excluded. These include Belgium, Greece, Ireland, the Netherlands, New Zealand, the Slovak Republic and Slovenia.

Source: OECD (2013), OECD Regional Statistics (database), http://dx.doi.org/10.1787/region-data-en, (accessed on 15 December 2013).

Chile’s high levels of regional inequality have not declined over the past 15 years, contrary to the trend observed in some OECD member countries, notably the former Eastern European countries of the Czech Republic, Hungary and Poland, as well as in Australia, Korea and Sweden. This suggests that regional policy in Chile, which has been mainly based on the old regional paradigm, has not delivered. As will be discussed in Chapter 2, the adoption of a national rural policy framework based on modern rural policies targeting the growth potential of rural regions, could help in reducing inequality, if it can help these regions become more integrated with urban regions and with overall national development.

Figure 1.18. Change in Gini Index of inequality of GDP per capita across OECD countries,

1995-2010

Note: Countries with less than four TL2 regions are excluded. These include Belgium, Greece, Ireland, the Netherlands, New Zealand, the Slovak Republic and Slovenia.

Source: OECD (2013), OECD Regional Statistics (database), http://dx.doi.org/10.1787/region-data-en, (accessed on 15 December 2013).

Chile’s high level of inequality is not only driven by strong growth in natural resource regions and Santiago, but also by the low performance of a number of other regions. Contrary to the belief that Chile’s high level of regional inequality is mainly driven by Santiago and regions specialised in mining activities (Antofagasta and Tarapaca), the under-performance of a wide range of regions is also a key driver of the high levels of inequality. Currently in more than half of Chilean regions - Araucania, Aysen, Bio-Bio, Coquimbo, Los Lagos, Maule and Valparaiso - GDP per capita is less than 75% of the national average. A simulated Gini coefficient for Chile excluding the outlier mining regions of Antofagasta and Tarapaca reveals that inequality would still be significantly higher (0.22) than the average in OECD countries.

Figure 1.19. GDP per capita in Chile’s TL2 regions and simulated inequality in GDP per capita,

1995 and 2011

Note: *refers to a simulation for Chile excluding the regions of Antofagasta and Tarapaca. Countries with less than four TL2 regions are excluded. These include Belgium, Greece, Ireland, the Netherlands, New Zealand, the Slovak Republic and Slovenia.

Source: OECD (2013), OECD Regional Statistics (database), http://dx.doi.org/10.1787/region-data-en, (accessed on 15 December 2013).

Chile’s geographic characteristics and difficult terrain pre-condition settlement patterns and economic activity. As a result of these geographic constraints, rural areas in Chile have very different characteristics and economic challenges. Furthermore, the country is facing a process of structural transformation and modernisation which is changing the realities of urban and rural areas at a very fast pace and the relationship amongst them. The official definition classifying urban and rural areas must adapt to these changes in order to ensure that policy implementation is effective and addresses the correct problems. On this front, the OECD has advanced in recent years in its methodology to classify urban and rural areas. The section that follows assesses the current definition classifying rural in Chile and presents some suggestions to revise it.

Within the OECD, at the national level, Chile is clearly a high-performing country. But its strong macroeconomic performance has made it possible to not focus on significant differences in economic performance and living standards that occur across the regions of Chile, especially in rural Chile. A large share of national income and an even larger share of exports are associated with the primary sector, especially minerals, but also agriculture, forestry and fisheries, yet there has been little focus on providing a stronger milieu for these industries at the regional level. Focusing on a better rural development policy could strengthen these sectors and address important social disadvantages in terms of basic indicators, like educational attainment, health status, poverty levels, housing quality and life expectancy that lead to significant inequality and social exclusion in the more rural parts of Chile.

 
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