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On the Determinants of Changes in Wage Inequality in 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.

Suggested Citation

  • Gustavo Canavire-Bacarreza & Fernando Rios-Avila, 2015. "On the Determinants of Changes in Wage Inequality in Bolivia," Documentos de Trabajo CIEF 12662, Universidad EAFIT.
  • Handle: RePEc:col:000122:012662
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    Cited by:

    1. Guillermo Cruces & Gary S. Fields & David Jaume & Mariana Viollaz, 2015. "The growth-employment-poverty nexus in Latin America in the 2000s: Bolivia country study," WIDER Working Paper Series wp-2015-070, World Institute for Development Economic Research (UNU-WIDER).
    2. Guillermo Cruces & Gary S. Fields & David Jaume & Mariana Viollaz, 2015. "The growth-employment-poverty nexus in Latin America in the 2000s: Bolivia country study," WIDER Working Paper Series 070, World Institute for Development Economic Research (UNU-WIDER).
    3. Aristizábal-Ramírez, María & Canavire Bacarreza, Gustavo J. & Jetter, Michael, 2015. "Income Inequality in Bolivia, Colombia, and Ecuador: Different Reasons," IZA Discussion Papers 9210, Institute of Labor Economics (IZA).
    4. 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.

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    More about this item

    Keywords

    Bolivia; Decomposition; Wage Inequality;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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