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Economic development and fluctuations in earnings inequality in the very long run: The evidence from Latin America 1900-2000

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  • Valpy FitzGerald

    (Oxford University, Oxford, UK)

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    Abstract

    Latin America has the most unequal income distribution of any region in the world, yet its historical causes are poorly understood. This paper reports the first exploratory attempt to compute income distributions for the five leading Latin American economies for the whole 20th century. The methodology produces estimates of earnings dispersion for four skill groups over 1900-2000, which can be used to generate the familiar Gini coefficients. Large fluctuations in dispersion over time are found: countering claims of stability since the colonial past in the recent economic institutions literature; but supporting the findings of economic historians and development economists. An estimation model (reflecting the impact of international trade, labour quality and macroeconomic imbalances) explains the data reasonably well, with all three sets of drivers proving significant, although the measured effects are different across the five countries. The paper concludes that the skill composition of the workforce not only underpins long run trends in income distribution; but also conditions inequality fluctuations in response to exogenous shocks. Copyright © 2008 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/jid.1511
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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

    Volume (Year): 20 (2008)
    Issue (Month): 8 ()
    Pages: 1028-1048

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    Handle: RePEc:wly:jintdv:v:20:y:2008:i:8:p:1028-1048

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    Web page: http://www3.interscience.wiley.com/journal/5102/home

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    1. Simon Kuznets & Lillian Epstein & Elizabeth Jenks, 1941. "Distribution of National Income," NBER Chapters, in: National Income and Its Composition, 1919-1938, Volume I, pages 61-95 National Bureau of Economic Research, Inc.
    2. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, vol. 10(3), pages 565-91, September.
    3. Wood, Adrian, 1998. "Globalisation and the Rise in Labour Market Inequalities," Economic Journal, Royal Economic Society, vol. 108(450), pages 1463-82, September.
    4. Wood, Adrian, 1997. "Openness and Wage Inequality in Developing Countries: The Latin American Challenge to East Asian Conventional Wisdom," World Bank Economic Review, World Bank Group, vol. 11(1), pages 33-57, January.
    5. Kuznets, Simon, 1976. " Demographic Aspects of the Size Distribution of Income: An Exploratory Essay," Economic Development and Cultural Change, University of Chicago Press, vol. 25(1), pages 1-94, October.
    6. Hongyi Li & Lyn Squire & Heng-fu Zou, 1998. "Explaining International and Intertemporal Variations in Income Inequality," CEMA Working Papers 73, China Economics and Management Academy, Central University of Finance and Economics.
    7. Valpy Fitzgerald & Pablo Astorga, 2003. "Productivity Growth in Latin America during the Twentieth Century," Economics Series Working Papers 2003-W52, University of Oxford, Department of Economics.
    8. François Bourguignon & Christian Morrisson, 2002. "Inequality Among World Citizens: 1820-1992," American Economic Review, American Economic Association, vol. 92(4), pages 727-744, September.
    9. Altimer, Oscar, 1987. "Income Distribution Statistics in Latin America and Their Reliability," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 33(2), pages 111-55, June.
    10. Gastwirth, Joseph L & Glauberman, Marcia, 1976. "The Interpolation of the Lorenz Curve and Gini Index from Grouped Data," Econometrica, Econometric Society, vol. 44(3), pages 479-83, May.
    11. Lopez, Humberto & Serven, Luis, 2006. "A normal relationship ? Poverty, growth, and inequality," Policy Research Working Paper Series 3814, The World Bank.
    12. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," NBER Working Papers 8460, National Bureau of Economic Research, Inc.
    13. Gareth Austin, 2008. "The 'reversal of fortune' thesis and the compression of history: Perspectives from African and comparative economic history," Journal of International Development, John Wiley & Sons, Ltd., vol. 20(8), pages 996-1027.
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