Droughts, Drought Mitigation Policy and Income Concentration Among Agricultural Producers. The Case of Chile

Research on water governance and inequality in Chile has mostly focused on the concentration of private water rights. However, complementary devices used to address the drought crisis, like the Water Scarcity Decree (WSD), are also central to the relationship between governance and inequality. This paper discusses the redistributive effects of the WSD, a tool that allows mainly large agricultural producers to exploit underground water. Using a difference-in-differences approach, we link the WSD establishment with relative changes in employment and income across agricultural workers. Our results show the widening of the income gap between agricultural producers, as large producers are the main winners after the issuing of a WSD.