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On the Determinants of Changes in Wage Inequality in Urban Bolivia

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  • Gustavo Canavire-Bacarreza
  • Fernando Rios-Avila

Abstract

In recent years, Bolivia has experienced a series of economic and political transformations that have directly affected the labor markets, particularly the salaried urban sector. Real wages have shown strong increases across the distribution, while also presenting a decrease in inequality. Using an intertemporal decomposition approach, we find evidence that changes in demographic and labor market characteristics can explain only a small portion of the observed inequality decline. Instead, the results indicate that the decline in wage inequality was driven by the faster wage growth of usually low-paid jobs, and wage stagnation of jobs that require higher education or are in traditionally highly paid fields. While the evidence shows that the reduction in inequality is significant, we suggest that such an improvement might not be sustainable in the long run, since structural factors associated with productivity, such as workers’ level of education, explain only a small portion of these wage changes. This suggests that enhanced redistributive policies accompanied by long-term structural policies aimed to increase productivity and educational level should be implemented in order to maintain the trends.

Suggested Citation

  • Gustavo Canavire-Bacarreza & Fernando Rios-Avila, 2017. "On the Determinants of Changes in Wage Inequality in Urban Bolivia," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 18(4), pages 464-496, October.
    • Handle: RePEc:taf:jhudca:v:18:y:2017:i:4:p:464-496
    DOI: 10.1080/19452829.2017.1353350
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    References listed on IDEAS

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    1. Francois Bourguignon & Francisco H.G. Ferreira & Nora Lustig, 2005. "The Microeconomics of Income Distribution Dynamics in East Asia and Latin America," World Bank Publications - Books, The World Bank Group, number 14844, December.
    2. -, 2014. "Latin American Economic Outlook 2015: Education, skills and innovation for development," Coediciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37446 edited by Ocde.
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    Cited by:

    1. Gustavo Canavire-Bacarreza & Luis C. Carvajal-Osorio, 2020. "Two Stories of Wage Dynamics in Latin America: Different Policies, Different Outcomes," Journal of Labor Research, Springer, vol. 41(1), pages 128-168, June.
    2. Luis Fernando Castro Peñarrieta & Gustavo Zárate Taborga & Valeria Salinas Maceda, 2019. " - Análisis de la desigualdad de largo plazo en Bolivia, 1976 - 201," INESAD book chapters, in: Beatriz Muriel Hernández (ed.), Investigaciones para el Desarrollo Económico de Bolivia, edition 1, volume 1, chapter 2, pages 81-112, Institute for Advanced Development Studies.
    3. Oscar Molina Tejerina & Luis Castro Peñarrieta, 2020. "Unexplained Wage Gaps in the Tradable and Nontradable Sectors: Cross-Sectional Evidence by Gender in Bolivia," Investigación & Desarrollo 0120, Universidad Privada Boliviana, revised Nov 2020.

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