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Deconstructing the Decline in Inequality in Latin America

Author

Listed:
  • Nora Lustig

    () (Department of Economics, Tulane University)

  • Luis F. Lopez-Calva

    () (Poverty and Gender Unit, Latin America and the Caribbean Vice-presidency, World Bank)

  • Eduardo Ortiz-Juarez

    () (Poverty, Human Development and Millennium Development Goal Unit, Regional Bureau for Latin America and the Caribbean, United Nations Development Programme (UNDP))

Abstract

Inequality in Latin America unambiguously declined in the 2000s. The Gini coefficient fell in 14 of the 17 countries where there is comparable data, and the change was statistically significant for all of them. Existing studies point to two main explanations for the decline in inequality: a reduction in hourly labor income inequality, and more robust and progressive government transfers. Available evidence suggests that it is the skill premium--or, more precisely, the returns to primary, secondary and tertiary education vs. no schooling or incomplete primary schooling--that drives the decline in hourly labor income inequality. The causes behind the decline in returns to schooling, however, have not been unambiguously established. Some studies find that returns fell because of an increase in the supply of workers with more educational attainment; others, because of a shift in demand away from skilled-labor.

Suggested Citation

  • Nora Lustig & Luis F. Lopez-Calva & Eduardo Ortiz-Juarez, 2013. "Deconstructing the Decline in Inequality in Latin America," Working Papers 1314, Tulane University, Department of Economics.
  • Handle: RePEc:tul:wpaper:1314
    as

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    File URL: http://repec.tulane.edu/RePEc/pdf/tul1314.pdf
    File Function: First Version, April 2013
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    References listed on IDEAS

    as
    1. Lustig, Nora & Lopez-Calva, Luis F. & Ortiz-Juarez, Eduardo, 2013. "Declining Inequality in Latin America in the 2000s: The Cases of Argentina, Brazil, and Mexico," World Development, Elsevier, vol. 44(C), pages 129-141.
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    4. Marco Manacorda & Carolina Sanchez-Paramo & Norbert Schady, 2010. "Changes in Returns to Education in Latin America: The Role of Demand and Supply of Skills," ILR Review, Cornell University, ILR School, vol. 63(2), pages 307-326, January.
    5. Nora Lustig & Luis F. Lopez-Calva & Eduardo Ortiz-Juarez, 2012. "Declining Inequality in Latin America in the 2000s: The Cases of Argentina, Brazil, and Mexico," Working Papers 1218, Tulane University, Department of Economics.
    6. Azevedo, Joao Pedro & Inchauste, Gabriela & Sanfelice, Viviane, 2013. "Decomposing the recent inequality decline in Latin America," Policy Research Working Paper Series 6715, The World Bank.
    7. Augusto de la Torre & Samuel Pienknagura & Eduardo Levy Yeyati, "undated". "Latin America and the Caribbean as Tailwinds Recede : In Search of Higher Growth, LAC Semiannual Report, April 2013," World Bank Other Operational Studies 13266, The World Bank.
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    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Good and Bad Inequality
      by Dani Rodrik in Project Syndicate on 2014-12-11 20:50:01

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    Cited by:

    1. Susana Martínez-Restrepo & Juan Camilo Mejía & Erika Enríquez, 2016. "Eliciting women's willingness to take a job. Evidence from displaced and extremely poor women in Cali, Colombia," COYUNTURA ECONÓMICA, FEDESARROLLO, vol. 46(1), pages 149-173, June.
    2. Fernandez Sierra, Manuel & Messina, Julián, 2017. "Skill Premium, Labor Supply and Changes in the Structure of Wages in Latin America," IZA Discussion Papers 10718, Institute for the Study of Labor (IZA).
    3. Cano Liliana, 2015. "Income Mobility in Ecuador: New Evidence from Individual Income Tax Returns," WIDER Working Paper Series 040, World Institute for Development Economic Research (UNU-WIDER).
    4. repec:bla:devpol:v:35:y:2017:i:5:p:659-674 is not listed on IDEAS
    5. Alfredo Macías Vázquez, 2014. "Crecimiento, desigualdad y pobreza: estado de la cuestión," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 16(31), pages 101-126, July-Dece.
    6. repec:bla:revinw:v:63:y:2017:i:4:p:661-684 is not listed on IDEAS
    7. Leonardo Gasparini & Guillermo Cruces & Leopoldo Tornarolli, 2016. "Chronicle of a Deceleration Foretold: Income inequality in Latin America in the 2010s," CEDLAS, Working Papers 0198, CEDLAS, Universidad Nacional de La Plata.
    8. Yang Wang, 2015. "Education Expansion and Decline in Tertiary Premium in Brazil: 1995-2013," Working Papers 1525, Tulane University, Department of Economics.
    9. Ernesto F. L. Amaral & Bernardo L. Queiroz & Julia A. Calazans, 2015. "Effects of Demographic and Educational Changes on the Labor Markets of Brazil and Mexico," Working Papers WR-1089, RAND Corporation.
    10. repec:ilo:ilowps:487581 is not listed on IDEAS
    11. Anita V. Staneva & Hany Abdel-Latif, 2016. "From Soviet to Europe: Returns to Education Puzzle in Bulgaria," LABOUR, CEIS, vol. 30(3), pages 347-367, September.
    12. Augusto de la Torre & Samuel Pienknagura & Eduardo Levy Yeyati, "undated". "Latin America and the Caribbean as Tailwinds Recede : In Search of Higher Growth, LAC Semiannual Report, April 2013," World Bank Other Operational Studies 13266, The World Bank.
    13. Carolina González-Velosa & Graciana Rucci & Miguel Sarzosa & Sergio Urzúa, 2015. "Returns to Higher Education in Chile and Colombia," IDB Publications (Working Papers) 88676, Inter-American Development Bank.

    More about this item

    Keywords

    inequality; skill premium; government transfers; Latin America;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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