Declining Inequality in Latin America in the 2000s: The Cases of Argentina, Brazil, and Mexico (original) (raw)

Decomposing the Recent Inequality Decline in Latin America

Policy Research Working Papers, 2013

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Declining inequality in Latin America: a decade of progress?

Choice Reviews Online, 2011

Review: Constantin Groll ♦ In debating income inequality in Latin America, most of the scholars are searching for explanations for the roots and causes of the persistence of this phenomenon. Nora Lustig and Luis F. López-Calva, two economists from Tulane University and UNDP, try it the other way around. In their edited volume Declining Inequalities in Latin America: A Decade of Progress? they focus on the rather unusual period in the Latin American history of declining income inequality between the years 2000 to 2007. Via country studies of Argentina, Brazil, Mexico and Peru they and their collaborators try to identify "proximate factors" which can explain the decline in the region, where out of 17 countries, 12 (Ecuador,

The recent decline of inequality in Latin America: Argentina, Brazil, Mexico and Peru

2009

Between 2000 and 2006, the Gini coefficient declined in 12 of the 17 Latin American countries for which data are available. Why has inequality declined? Have the changes in inequality been driven by market forces such as the demand and supply for labor with different skills? Or have governments become more redistributive than they used to be, and if so, why? This paper attempts to answer these questions by focusing on the determinants of inequality in four countries: Argentina, Brazil, Mexico and Peru. The analysis suggests that the decline in inequality is accounted for by two main factors: (i) a fall in the earnings gap between skilled and low-skilled workers (through both quantity and price effects); and (ii) more progressive government transfers (monetary and in-kind transfers). Demographic factors, such as a change in the proportion of adults (and working adults) per household, have been equalizing but the magnitude of their contribution has been small by comparison. In Brazil, Mexico and Peru, the fall in earnings gap, in turn, is mainly the result of the expansion of basic education over the last couple of decades, which reduced inequality in attainment and made the returns to education curve less steep. It also results from the petering out of the unequalizing effect of skill-biased technical change in the 1990s associated with the opening up of trade and investment. In Argentina, the decline in earnings inequality seems to be associated with government policies that without the windfall of high commodity prices will be hard to sustain. 3 change, macroeconomic conditions or stronger labor unions? Do changes in the coverage and distribution of government transfers account for a significant part of the decline in income inequality? What has been the role of socio-demographic factors such as changes in dependency ratios and labor force participation rates for women? This paper attempts to answer these questions by focusing on the determinants of changes in income inequality in four countries: Argentina, Brazil, Mexico and Peru. 6 The analysis is based on a variety of parametric and non-parametric methods to decompose the changes in household income inequality in its proximate factors. This empirical analysis is combined with indirect evidence and historical narratives to delve into the more fundamental determinants of inequality. The analysis suggests that the decline in inequality is accounted for by two main factors: (i) a fall in the earnings gap between skilled and low-skilled workers (through both quantity and price effects); and (ii) more progressive government transfers (monetary and inkind transfers). Demographic factors, such as a change in the proportion of adults (and working adults) per household, have been equalizing but the magnitude of their contribution has been, in general, relatively smaller. In Brazil, Mexico and Peru, the fall in earnings gap, in turn, is mainly the result of the expansion of basic education over the last couple of decades, which reduced inequality in attainment and made the returns to education curve less steep. It also results from the petering out of the unequalizing effect of skill-biased technical change in the 1990s associated with the opening up of trade and investment. In the case of Argentina, the decline in inequality seems to be driven by a pro-union stance on the part of the government and redistributive fiscal policy based on the windfall of high commodity prices.

The Decline in Inequality in Latin America: How Much, Since When and Why

SSRN Electronic Journal, 2000

Between 2000 and 2009, the Gini coefficient declined in 13 of 17 Latin American countries for which comparable data exist. The decline was statistically significant and robust to changes in the time interval, inequality measures and data sources. In depth country studies for Argentina, Brazil, Mexico and Peru suggest that there are two phenomena which underlie this trend: (i) a fall in the premium to skilled labor (as measured by returns to education); and (ii) higher and more progressive government transfers. The fall in the premium to skills results from a combination of supply and demand factors and, in Argentina-and to a lesser extent in Brazil--, from more active labor market policies as well.

Has Latin American Inequality Changed Direction? Looking Over the Long Run

This book brings together a range of ideas and theories to arrive at a deeper understanding of inequality in Latin America and its complex realities. To so, it addresses questions such as: What are the origins of inequality in Latin America? How can we create societies that are more equal in terms of income distribution, gender equality and opportunities? How can we remedy the social divide that is making Latin America one of the most unequal regions on earth? What are the roles played by market forces, institutions and ideology in terms of inequality? In this book, a group of global experts gathered by the Institute for the Integration of Latin America and the Caribbean (INTAL), part of the Inter-American Development Bank (IDB), show readers how various types of inequality, such as economical, educational, racial and gender inequality have been practiced in countries like Brazil, Bolivia, Chile, Mexico and many others through the centuries. Presenting new ideas, new evidence, and new methods, the book subsequently analyzes how to move forward with second-generation reforms that lay the foundations for more egalitarian societies. As such, it offers a valuable and insightful guide for development economists, historians and Latin American specialists alike, as well as students, educators, policymakers and all citizens with an interest in development, inequality and the Latin American region.

Deconstructing the Decline in Inequality in Latin America

Policy Research Working Papers, 2013

Inequality in Latin America unambiguously declined in the 2000s. The Gini coefficient fell in 14 of the 17 countries where there is comparable data, and the change was statistically significant for all of them. Existing studies point to two main explanations for the decline in inequality: a reduction in hourly labor income inequality, and more robust and progressive government transfers. Available evidence suggests that it is the skill premium -or, more precisely, the returns to primary, secondary and tertiary education vs. no schooling or incomplete primary schooling-that drives the decline in hourly labor income inequality. The causes behind the decline in returns to schooling, however, have not been unambiguously established. Some studies find that returns fell because of an increase in the supply of workers with more educational attainment; others, because of a shift in demand away from skilled-labor.

Inequality Trends and Their Determinants: Latin America over the Period 1990–2010*

Policy Changes and Lessons, 2014

The paper reviews the steady and widespread decline in income inequality which has taken place in most of Latin America over 2002-10 and which--if continued for another 2-3 years--would reduce the average regional income inequality to pre-liberalization levels. The paper then focuses on the factors, which may explain such inequality decline. A review of the literature and an econometric test indicate that a few complementary factors played an important role in this regard, including a drop in the skill premium following a rapid expansion of secondary education, and the adoption of a new development model by a growing number of left-of-centre governments which emphasizes fiscally-prudent but more equitable macroeconomic, tax, social expenditure and labour policies. For the region as a whole, improvements in terms of trade, migrant remittances, FDI and world growth played a less important role than expected although their impact was perceptible in countries where such transactions were sizeable.

Inequality Trends and their Determinants: Latin America over 1990-2010

2012

Declining Inequality in Latin America in the 2000s: The Cases of Argentina, Brazil, and Mexico (original) (raw)

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