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Twenty Years of Wage Inequality in Latin America

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  • Messina, Julián
  • Silva, Joana

Abstract

This paper documents an inverse U-shape in the evolution of wage inequality in Latin America since 1995, with a sharp reduction starting in 2002. The Gini coefficient of wages increased from 42 to 44 between 1995 and 2002 and declined to 39 by 2015. Between 2002 and 2015, the 90/10 log hourly earnings ratio decreased by 26 percent. The decline since 2002 was characterized by rising wages across the board, but especially among those at the bottom of the wage distribution in each country. Triggered by a rapid expansion of educational attainment, the wages of college and high school graduates fell relative to those with primary education. The premium for labor market experience also fell significantly. But the compression of wages was not entirely driven by changes in the wage structure across skill groups. Two-thirds of the decline in the variance of wages took place within skill groups. Changes in the sectoral, occupational, and formal-informal composition of jobs matter for the process of reduction in inequality, but do not fully account for the fall in within-skill variance. Evidence using longitudinal matched employer-employee administrative data suggests that an important driver was falling wage compression across firms.

Suggested Citation

  • Messina, Julián & Silva, Joana, 2019. "Twenty Years of Wage Inequality in Latin America," IDB Publications (Working Papers) 9734, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:9734
    DOI: http://dx.doi.org/10.18235/0001806
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    Cited by:

    1. Francisco H G Ferreira & Sergio P Firpo & Julián Messina, 2022. "Labor Market Experience and Falling Earnings Inequality in Brazil: 1995–2012," The World Bank Economic Review, World Bank, vol. 36(1), pages 37-67.
    2. Benoit Dostie & Genevieve Dufour, 2024. "Évolution de la distribution de la productivité des entreprises québécoises entre 2005 et 2019," CIRANO Project Reports 2024rp-19, CIRANO.
    3. Weller, Jürgen, 2022. "Tendencias mundiales, pandemia de COVID-19 y desafíos de la inclusión laboral en América Latina y el Caribe," Documentos de Proyectos 48610, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    4. González-Rozada, Martín & Ruffo, Hernán, 2024. "Do trade agreements contribute to the decline in labor share? Evidence from Latin American countries," World Development, Elsevier, vol. 177(C).
    5. Laporšek, Suzana & Orazem, Peter F. & Vodopivec, Milan & Vodopivec, Matija, 2021. "Winners and losers after 25 years of transition: Decreasing wage inequality in Slovenia," Economic Systems, Elsevier, vol. 45(2).
    6. Prasha Sooful & Alex Hogan & Justine Williams & Renae Moore, 2021. "Escape into Culturally Safe Patient Centered Care," Noble International Journal of Social Sciences Research, Noble Academic Publsiher, vol. 6(2), pages 18-23, February.
    7. Yoshimichi Murakami, 2021. "Trade liberalization and wage inequality: Evidence from Chile," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 30(3), pages 407-438, April.
    8. Sergio Pinheiro Firpo & Alysson Lorenzon Portella, 2024. "The labor market in Brazil, 2001–2022," IZA World of Labor, Institute of Labor Economics (IZA), pages 4412-4412, April.
    9. Dorn, David & Levell, Peter, 2021. "Trade and Inequality in Europe and the US," CEPR Discussion Papers 16780, C.E.P.R. Discussion Papers.
    10. Ali Cenap Yologlu & Bulent Halisdemir, 2024. "Understanding the Social Determinants of Household Carbon Emissions for Carbon Mitigation Policies: The Case of Mersin, Turkey," Sustainability, MDPI, vol. 16(14), pages 1-29, July.
    11. Valentin Lang & Stephan A. Schneider, 2023. "Immigration and Nationalism in the Long Run," CESifo Working Paper Series 10621, CESifo.
    12. Bonvecchi, Alejandro & Calvo, Ernesto & Otálvaro-Ramírez, Susana & Scartascini, Carlos, 2022. "The Effect of a Crisis on Trust and Willingness to Reform: Evidence from Survey Panels in Argentina and Uruguay," IDB Publications (Working Papers) 12359, Inter-American Development Bank.
    13. Muñoz, Ercio, 2021. "The Geography of Intergenerational Mobility in Latin America and the Caribbean," SocArXiv mc78h, Center for Open Science.
    14. Yuchuan Tan & Yanzhong Liu & Yong Chen & Zuo Zhang & Dan Wu & Hongyi Chen & Yufei Han, 2023. "The Impact of Urban Construction Land Change on Carbon Emissions—A Case Study of Wuhan City," IJERPH, MDPI, vol. 20(2), pages 1-18, January.
    15. Carrington, Sarah J. & Herrero Olarte, Susana & Urbina, Gabriel, 2023. "Commodity cycle management in Latin America: The importance of resilience in face of vulnerability," Resources Policy, Elsevier, vol. 81(C).
    16. Congiu, Raffaele & Sabatino, Lorien & Sapi, Geza, 2022. "The Impact of Privacy Regulation on Web Traffic: Evidence From the GDPR," Information Economics and Policy, Elsevier, vol. 61(C).
    17. Manuel Fernández & Gabriela Serrano, 2022. "New Perspectives on Inequality in Latin America," Documentos CEDE 20295, Universidad de los Andes, Facultad de Economía, CEDE.
    18. Jorge Pérez Pérez & José G. Nuño-Ledesma, 2024. "Workers, Workplaces, Sorting, and Wage Dispersion in Mexico," Working Papers 2024-06, Banco de México.
    19. Paulette J. O’Gilvie, 2022. "The impact of casino proximity on northeast urban communities: a literature review," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-9, December.
    20. Stemmler, Henry, 2023. "Automated Deindustrialization: How Global Robotization Affects Emerging Economies—Evidence from Brazil," World Development, Elsevier, vol. 171(C).
    21. Arora, Diksha & Braunstein, Elissa & Seguino, Stephanie, 2023. "A macro analysis of gender segregation and job quality in Latin America," World Development, Elsevier, vol. 164(C).
    22. Wenxiao Wang & Christopher Findlay & Shandre Thangavelu, 2021. "Trade, technology, and the labour market: impacts on wage inequality within countries," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 35(1), pages 19-35, May.
    23. Venera Timiryanova & Dina Krasnoselskaya & Natalia Kuzminykh, 2022. "Applying the Multilevel Approach in Estimation of Income Population Differences," Stats, MDPI, vol. 6(1), pages 1-32, December.

    More about this item

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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