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Productivity, social expenditure and income distribution in Latin America

Author

Listed:
  • Mario Cimoli

    (DPPM, Economic Commission for Latin America and the Caribbean (ECLAC) and University of Venice)

  • Gabriel Porcile

    (DPPM, ECLAC and Federal University of Parana,)

  • Antonio Martins Neto

    (DPPM, ECLAC,)

  • Fernando Sossdorf

    (DPPM, ECLAC)

Abstract

This paper discusses the role of institutions and structural change in shaping income inequality. It is argued that while social expenditure and direct redistribution are crucial for improving income distribution, sustainable equality requires structural change. The relative importance of these variables in different countries is analyzed and a typology suggested. It is argued that the most equal countries in the world combine strong institutions in favor of redistribution and knowledge-intensive production structures that sustain growth and employment in the long run. Both institutions and the production structure in Latin America fail to foster equality and this explains its extremely high levels of inequality. The paper presents empirical evidence that supports this view, based on a sample of developed and developing countries for the period 1990-2010. Institutions for redistribution are captured through social expenditures as a percentage of GDP, while the role of structural change is captured by indicators of the technological intensity of production and the evolution of labor productivity. The technological intensity of the production structure is proxied through two indicators, the Economic Complexity Index and the ECLAC Index of Technological Intensity. JEL Classification: D30; H52; O33; O54.

Suggested Citation

  • Mario Cimoli & Gabriel Porcile & Antonio Martins Neto & Fernando Sossdorf, 2017. "Productivity, social expenditure and income distribution in Latin America," Brazilian Journal of Political Economy, Center of Political Economy, vol. 37(4), pages 660-679, February.
    • Handle: RePEc:ekm:repojs:v:37:y:2017:i:4:id:95256
    DOI: 10.1590/0101-31572017v37n04a01
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    Keywords

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    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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