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Economic Growth and Inequality: Evidence from the Young Democracies of South America

  • Manoel Bittencourt


    (Department of Economics, University of Pretoria)

We investigate in this paper whether income growth has played any role on inequality in all nine young South American democracies during the period 1970-2007. The results, based on dynamic panel time-series analysis, robustly suggest that income growth has indeed played a progressive role in reducing inequality during the period. Moreover, the results suggest that this negative relationship is even stronger in the 1990s and early 2000s, a period in which the continent achieved macroeconomic stabilisation, political consolidation and much improved economic performance. On the contrary, during the 1980s (the so-called "lost decade"), the negative income growth experienced by the continent at the time has hit the poor the hardest, or alternatively speaking, it has played a regressive role on inequality. All in all, we suggest that consistent growth, and all that it encompasses, is an important equaliser which should not be discarded as a serious option by policy makers interested in a more equal income distribution.

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Paper provided by University of Pretoria, Department of Economics in its series Working Papers with number 201301.

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Length: 25 pages
Date of creation: Jan 2013
Date of revision:
Handle: RePEc:pre:wpaper:201301
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  1. Manoel Bittencourt, 2010. "Financial development and inequality: Brazil 1985–1994," Economic Change and Restructuring, Springer, vol. 43(2), pages 113-130, May.
  2. Alesina, Alberto & Drazen, Allan, 1991. "Why Are Stabilizations Delayed?," American Economic Review, American Economic Association, vol. 81(5), pages 1170-88, December.
  3. Manoel BITTENCOURT, 2009. "Macroeconomic Performance And Inequality: Brazil, 1983-94," The Developing Economies, Institute of Developing Economies, vol. 47(1), pages 30-52.
  4. Spilimbergo, Antonio & Londono, Juan Luis & Szekely, Miguel, 1999. "Income distribution, factor endowments, and trade openness," Journal of Development Economics, Elsevier, vol. 59(1), pages 77-101, June.
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  13. Kristin J. Forbes, 2000. "A Reassessment of the Relationship between Inequality and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 869-887, September.
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  17. Li, Hongyi & Squire, Lyn & Zou, Heng-fu, 1998. "Explaining International and Intertemporal Variations in Income Inequality," Economic Journal, Royal Economic Society, vol. 108(446), pages 26-43, January.
  18. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 70(1), pages 65-94.
  19. de Janvry, Alain & Sadoulet, Elisabeth, 2000. "Growth, Poverty, and Inequality in Latin America: A Causal Analysis, 1970-94," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 46(3), pages 267-87, September.
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