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Deconstructing the decline in inequality in Latin America

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  • Lustig, Nora
  • Lopez-Calva, Luis F.
  • Ortiz-Juarez, Eduardo

Abstract

Inequality in Latin America unambiguously declined in the 2000s. The Gini coefficient fell in 16 of the 17 countries where there are 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.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6552.

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Date of creation: 01 Jul 2013
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Handle: RePEc:wbk:wbrwps:6552

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Keywords: Inequality; Poverty Impact Evaluation; Labor Markets; Population Policies; Labor Policies;

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References

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  1. Nora Lustig, Luis F. Lopez-Calva, Eduardo Ortiz-Juarez, 2012. "Declining Inequality in Latin America in the 2000s: The Cases of Argentina, Brazil, and Mexico," Working Papers 307, Center for Global Development.
  2. Claudia Goldin & Lawrence F. Katz, 2007. "The Race between Education and Technology: The Evolution of U.S. Educational Wage Differentials, 1890 to 2005," NBER Working Papers 12984, National Bureau of Economic Research, Inc.
  3. Azevedo, Joao Pedro & Davalos, Maria Eugenia & Diaz-Bonilla, Carolina & Atuesta, Bernardo & Castaneda, Raul Andres, 2013. "Fifteen years of inequality in Latin America : how have labor markets helped ?," Policy Research Working Paper Series 6384, The World Bank.
  4. Loreto Reyes & Jorge Rodríguez & Sergio S. Urzúa, 2013. "Heterogeneous Economic Returns to Postsecondary Degrees: Evidence from Chile," NBER Working Papers 18817, National Bureau of Economic Research, Inc.
  5. Augusto de la Torre & Julian Messina & Samuel Pienknagura, . "The Labor Market Story Behind Latin America's Transformation : LAC Semiannual Report, October 2012," World Bank Other Operational Studies 11884, The World Bank.
  6. Pedro Carneiro & Sokbae Lee, 2011. "Trends in Quality-Adjusted Skill Premia in the United States, 1960-2000," American Economic Review, American Economic Association, vol. 101(6), pages 2309-49, October.
  7. Giovanni Andrea cornia, 2009. "Income Distribution under Latin America’s New Left Regimes," Working Papers - Economics wp2009_16.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
  8. Francois Bourguignon & Francisco H. G. Ferreira & Nora Lusting, 2005. "The Microeconomics of Income Distribution Dynamics in East Asia and Latin America," World Bank Publications, The World Bank, number 14844, October.
  9. Nora Lustig & Carola Pessino, 2012. "Social Spending and Income Redistribution in Argentina During the 2000s: the Rising Role of Noncontributory Pensions," Working Papers 1221, Tulane University, Department of Economics.
  10. Marco Manacorda & Carolina Sánchez-Páramo & Norbert Schady, 2010. "Changes in Returns to Education in Latin America: The Role of Demand and Supply of Skills," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 63(2), pages 307-326, January.
  11. Juan Castro & Gustavo Yamada, 2012. "“Convexification” and “Deconvexification” of the Peruavian Wage Profile: A Tale of Declining Education Quality," Working Papers 12-02, Departamento de Economía, Universidad del Pacífico, revised Apr 2012.
  12. Azevedo, Joao Pedro & Inchauste, Gabriela & Sanfelice, Viviane, 2013. "Decomposing the recent inequality decline in Latin America," Policy Research Working Paper Series 6715, The World Bank.
  13. Lerman, Robert I & Yitzhaki, Shlomo, 1985. "Income Inequality Effects by Income," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 151-56, February.
  14. Katz, L.F. & Murphy, K.M., 1991. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," Harvard Institute of Economic Research Working Papers 1580, Harvard - Institute of Economic Research.
  15. Augusto de la Torre & Samuel Pienknagura & Eduardo Levy Yeyati, . "Latin America and the Caribbean as Tailwinds Recede : In Search of Higher Growth, LAC Semiannual Report, April 2013," World Bank Other Operational Studies 13266, The World Bank.
  16. Datt, Gaurav & Ravallion, Martin, 1992. "Growth and redistribution components of changes in poverty measures : A decomposition with applications to Brazil and India in the 1980s," Journal of Development Economics, Elsevier, vol. 38(2), pages 275-295, April.
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  1. Pourquoi les inégalités ont-elles baissé en Amérique latine ?
    by ? in D'un champ l'autre on 2014-07-18 11:41:00
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  1. Augusto de la Torre & Samuel Pienknagura & Eduardo Levy Yeyati, . "Latin America and the Caribbean as Tailwinds Recede : In Search of Higher Growth, LAC Semiannual Report, April 2013," World Bank Other Operational Studies 13266, The World Bank.

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