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Inequality and Poverty under Latin America's New Left Regimes

  • Darryl McLeod

    (Fordham University, Department of Economics)

  • Nora Lustig

    (Tulane University, Department of Economics)

During the last decade, inequality and poverty fell sharply in many Latin American countries; a period in which voters chose left-leaning leaders in ten countries including about half the region's population. Are these two developments related? Using data for 18 Latin American countries and political regime classification of Arnson and Perales (2007), this paper presents some econometric evidence that the social democratic regimes in Brazil, Chile and to a lesser extent Uruguay were more successful at reducing inequality and poverty than the so-called left populist regimes of Argentina, Bolivia and Venezuela. Both groups implemented policies to redistribute income, but the social democratic regimes redistributive efforts were more effective. Argentina and Venezuela started the 1990-2008 sample window with lower levels of inequality, so to some extent recent reductions in inequality are a return to "normal" levels (as estimated by fixed effects). Inequality and poverty in Brazil and Chile, on the other hand, fell to historic lows during this period. Second, overall terms of trade shocks were more favorable for Argentina and Venezuela, so part of the drop in inequality in those countries can be attributed to typically transient commodity price booms.

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Paper provided by Fordham University, Department of Economics in its series Fordham Economics Discussion Paper Series with number dp2010-13.

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Date of creation: 2010
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Handle: RePEc:frd:wpaper:dp2010-13
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  1. Giovanni Andrea Cornia, 2010. "Income Distribution under Latin America's New Left Regimes," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 11(1), pages 85-114.
  2. Paul Collier & Benedikt Goderis, 2007. "Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum," Economics Series Working Papers WPS/2007-15, University of Oxford, Department of Economics.
  3. Fernanda Brollo & Tommaso Nannicini & Roberto Perotti & Guido Tabellini, 2010. "The Political Resource Curse," NBER Working Papers 15705, National Bureau of Economic Research, Inc.
  4. Georgy Egorov & Konstantin Sonin, 2013. "A Political Theory of Populism," The Quarterly Journal of Economics, Oxford University Press, vol. 128(2), pages 771-805.
  5. Leonardo Gasparini & Guillermo Cruces & Leopoldo Tornarolli, 2009. "Recent trends in income inequality in Latin America," Working Papers 132, ECINEQ, Society for the Study of Economic Inequality.
  6. Lustig, N. & Mcleod, D., 1996. "Minimum Wages and Poverty in Developing Countries : Some Empirical Evidence," Papers 125, Brookings Institution - Working Papers.
  7. Maxim Pinkovskiy & Xavier Sala-i-Martin, 2009. "Parametric Estimations of the World Distribution of Income," NBER Working Papers 15433, National Bureau of Economic Research, Inc.
  8. Paul Collier & Benedikt Goderis, 2008. "Commodity Prices and Growth: An empirical investigation," OxCarre Working Papers 014, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
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