Title page
Contents
Executive summary 10
1. Key policy insights 15
Recent macroeconomic developments and short-term prospects 20
Avoiding hysteresis effects on inequality after the outbreak and building a stronger middle class 32
Closing productivity gaps to make mid-size firms thriving and support the recovery 48
Continuing to decouple economic growth from environmental impacts 59
References 62
2. Making digital transformation work for all in Chile 64
Promote connectivity and close the digital divide 66
Unlocking digital skills development and innovation capacity 73
Boosting business dynamism and the diffusion of knowledge in the digital era 85
Preserving social cohesion and helping workers make the most out of a dynamic labour market 97
Achieving sustainable and reliable digital infrastructures 112
References 118
Table 1. Chile is set for a gradual recovery 11
Table 1.1. Macroeconomic indicators and projections 26
Table 1.2. Events that could lead to major changes in the outlook 28
Table 1.3. The structural budget deficit was stable until recently 30
Table 1.4. Past OECD recommendations on macroeconomic policies 32
Table 1.5. Past OECD recommendations on inclusive growth 47
Table 1.6. Past OECD recommendations on productivity 56
Table 1.7. Illustrative GDP-per-capita impact of recommended reforms 58
Table 1.8. Illustrative fiscal impact of recommended reforms 58
Figure 1. Progress in poverty reduction has been impressive but inequality remains high 11
Figure 2. The outbreak may reinforce the already high share of vulnerable households 12
Figure 3. The tax and transfer system could do more to reduce inequality 13
Figure 4. Competitive pressures remain low 13
Figure 1.1. Growth, inclusiveness and well-being outcomes in Chile 17
Figure 1.2. Growth started to decelerate before the outbreak 21
Figure 1.3. The labour market has been significantly hit 22
Figure 1.4. Inflation is on target and expectations remain anchored 23
Figure 1.5. The current account has moved into surplus during the pandemic 24
Figure 1.6. Financial conditions stay favourable 25
Figure 1.7. The concentration of specialised exports to China and the United States is a risk to growth 28
Figure 1.8. Monetary policy is accommodative 29
Figure 1.9. Illustrative public debt paths 31
Figure 1.10. Social mobility is low in Chile 33
Figure 1.11. Economic vulnerability is high while income is concentrated at the top 34
Figure 1.12. Core spending falls disproportionately on the poorest sections of the population 35
Figure 1.13. Quality and inclusiveness of education are low 36
Figure 1.14. Spending in pre-primary, primary and secondary education is lagging behind 37
Figure 1.15. Enrolment in early childhood education has increased but quality remains low 38
Figure 1.16. Duality and informality remain high 39
Figure 1.17. Training programmes do not reach the most vulnerable 41
Figure 1.18. The tax and transfer system could provide more protection for vulnerable households 42
Figure 1.19. The personal income tax structure has little redistributive power 43
Figure 1.20. Illustrative income redistribution effects of selected tax reforms 45
Figure 1.21. Chile has the one of the highest gap in health status between education groups 46
Figure 1.22. Out-of-pocket spending for health care are amongst the highest in the OECD 46
Figure 1.23. Productivity is low and polarised 49
Figure 1.24. Competitive pressures remain low 50
Figure 1.25. The complexity of some regulations remains the highest in the OECD 51
Figure 1.26. The impact of new regulations should be systematically assessed 53
Figure 1.27. The insolvency regime can be eased further 54
Figure 1.28. Corruption remains low 55
Figure 1.29. Green growth indicators 60
Figure 2.1. Increasing access to fixed broadband and reducing the regional disparities are the main challenges 67
Figure 2.2. Regulatory barriers on communications are high 69
Figure 2.3. There are wide disparities in Internet use 71
Figure 2.4. Access to Internet at home is widely determined by socio-economic variables 72
Figure 2.5. Digital adoption lags behind mainly in micro firms 73
Figure 2.6. Chilean workers lack the skills to thrive in the digital era 74
Figure 2.7. Training teachers to be drivers of digital transformation should be a priority 76
Figure 2.8. Risks of digital transformation and extreme use of Internet should be avoided 77
Figure 2.9. ICT skills are increasingly demanded in Chile 78
Figure 2.10. Chile is experiencing a clear shortage of ICT workers 79
Figure 2.11. Bridging the innovation divide is necessary to increase productivity 81
Figure 2.12. R&D and innovation spending remains low 82
Figure 2.13. Public support for innovation has increased but remains limited 83
Figure 2.14. Business collaboration should be strengthened 84
Figure 2.15. The diffusion of digital tools needs a boost 86
Figure 2.16. Digital adoption leads to higher firm level productivity 87
Figure 2.17. E-commerce in Chile has been growing at a fast pace 88
Figure 2.18. Competitive pressures remain low and the regulatory burden is high 90
Figure 2.19. Chile has room to increase the number of Fintech start-ups 93
Figure 2.20. The development of venture capital has stalled in Chile 93
Figure 2.21. Digital Services Trade Restrictiveness is high 95
Figure 2.22. The interoperability of national regulatory frameworks with the region could improve 96
Figure 2.23. Employment in digital-intensive sectors remains low in Chile 98
Figure 2.24. The Chilean labour market shows signs of polarisation 99
Figure 2.25. More than half of jobs are at risk of automation, affecting more low and middle-classes 100
Figure 2.26. Employment in routine manual occupations and those with high risk of automation has decreased in the last decade 101
Figure 2.27. Automation risk and labour market transitions in Chile 102
Figure 2.28. Artificial intelligence and labour market transitions in Chile 102
Figure 2.29. Automation risk leads to lower wages for the low-income, but artificial intelligence has a positive impact 103
Figure 2.30. Online platforms have increased at a fast pace in Chile 104
Figure 2.31. Self-employment, temporary and informal jobs are prevalent in Chile 105
Figure 2.32. Participation in training is high in Chile 109
Figure 2.33. Most vulnerable workers receive less training 110
Figure 2.34. The uptake of digital government services remains low 113
Figure 2.35. Cybersecurity capacities are lacking 114
Figure 2.36. Data privacy violations are the highest in the OECD 115
Boxes
Box 1.1. Policy responses to the COVID-19 pandemic 18
Box 1.2. Keys features of the social agenda in response to October 2019 protests 20
Box 1.3. How does a negative income tax work? The example of the Earned Income Tax Credit in the United States 44
Box 1.4. Illustrative impacts of a more inclusive tax system on income inequality 44
Box 1.5. The Zero Licensing Initiative in Portugal 52
Box 1.6. Potential impact of structural reforms on per capita GDP 58
Box 1.7. Quantifying the fiscal impact of structural reforms 58
Box 2.1. Ongoing projects to extend fibre cables throughout Chile 68
Box 2.2. The divide in household Internet usage in Chile 72
Box 2.3. Digitalisation is already having a positive impact on Chilean firms' productivity 87
Box 2.4. Is the impact of digital technologies already visible in the Chilean labour market? 101
Box 2.5. The impact of digital transformation on wages in Chile 103