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

  • Manoel Bittencourt

We investigate in this paper whether income growth has played any role on inequality in all nine young South American democracies during 1970-2007. The results, based on dynamic panel time-series analysis, suggest that income growth has played a progressive role in reducing inequality during the period. Moreover, the results suggest that this negative relationship is 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, which has consequently lead to an increase in 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 plausible option by policy makers interested in a more equal income distribution.

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Paper provided by Economic Research Southern Africa in its series Working Papers with number 361.

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Length: 29 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:rza:wpaper:361
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  1. Hongyi Li & Lyn Squire & Heng-fu Zou, 1998. "Explaining International and Intertemporal Variations in Income Inequality," CEMA Working Papers 73, China Economics and Management Academy, Central University of Finance and Economics.
  2. Barro, Robert J. & Lee, Jong Wha, 2013. "A new data set of educational attainment in the world, 1950–2010," Journal of Development Economics, Elsevier, vol. 104(C), pages 184-198.
  3. Manoel F. Meyer Bittencourt, 2005. "Macroeconomic Performance and Inequality: Brazil 1983-94," Ibero America Institute for Econ. Research (IAI) Discussion Papers 130, Ibero-America Institute for Economic Research.
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  13. Easterly, William, 1999. " Life during Growth," Journal of Economic Growth, Springer, vol. 4(3), pages 239-76, September.
  14. Mattias Lundberg & Lyn Squire, 2003. "The simultaneous evolution of growth and inequality," Economic Journal, Royal Economic Society, vol. 113(487), pages 326-344, 04.
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  17. 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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