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Determinants of inequality in the Andean Community: evidence from a Bayesian panel VAR

Author

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  • Nicole Cáceres

    (Universidad de Lima)

  • Dante Urbina

    (Universidad de Lima)

Abstract

This article analyzes the determinants of income inequality in the countries of Andean Community considering the effects of foreign direct investment, human capital, unemployment, and production by means of a Bayesian panel VAR model. It is found that: i) foreign direct investment has a negative effect on income inequality in Bolivia, which is consistent with the neoclassical theory of international trade, and a positive one in Peru, which is the country with the most mining in the sample; ii) the response of inequality to shocks in human capital is positive in almost all cases, which could imply that education amplifies the existing gap; iii) the impact of unemployment on inequality is positive in Colombia, the country with the lowest level of informality, negative in Peru and not significant in Bolivia and Ecuador, where the loss of formal jobs does not necessarily affect income because there is the alternative of informal employment; iv) the effect of production on inequality is positive in Bolivia and Colombia, but negative in Ecuador and Peru.

Suggested Citation

  • Nicole Cáceres & Dante Urbina, 2023. "Determinants of inequality in the Andean Community: evidence from a Bayesian panel VAR," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 99, pages 209-243, July-Dece.
    • Handle: RePEc:lde:journl:y:2023:i:99:p:209-243
    DOI: 10.17533/udea.le.n99a352399
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    More about this item

    Keywords

    Income distribution; human development; human resources; foreign direct investment;
    All these keywords.

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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