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Accounting for Changing Inequality in Costa Rica, 1980-1999

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  • T. H. Gindling

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  • Juan Diego Trejos

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Abstract

After declining from the mid-1970s to the mid-1980s, earnings inequality in Costa Rica stabilized from 1987 to 1992 and then increased from 1992 to 1999. In this paper we use recently-developed techniques to measure the extent to which these changes in earnings inequality were the result of changes associated with the distributions (or .quantities.) of personal and work place characteristics of workers, and the earnings differences (or .prices.) associated with those characteristics. We present evidence that the most important cause of the fall in inequality prior to 1987 was a decline in returns to education, which in turn was caused by an increase in the supply of more-educated workers. We find that the most important causes of rising inequality in the 1990s were the end of this decline in returns to education and increases in the variance of hours worked among workers. Inequality in hours worked increased because of an increase in the proportion of workers working a non-standard work week (part-time or over-time)

Suggested Citation

  • T. H. Gindling & Juan Diego Trejos, 2003. "Accounting for Changing Inequality in Costa Rica, 1980-1999," UMBC Economics Department Working Papers 03-108, UMBC Department of Economics.
  • Handle: RePEc:umb:econwp:03108
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    File URL: http://www.umbc.edu/economics/wpapers/wp_03_108.pdf
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    References listed on IDEAS

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    1. Gindling, T. H. & Robbins, Donald, 2001. "Patterns and Sources of Changing Wage Inequality in Chile and Costa Rica During Structural Adjustment," World Development, Elsevier, vol. 29(4), pages 725-745, April.
    2. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
    3. Robinson, Sherman, 1976. "A Note on the U Hypothesis Relating Income Inequality and Economic Development," American Economic Review, American Economic Association, vol. 66(3), pages 437-440, June.
    4. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
    5. Robbins, Donald & Gindling, T H, 1999. "Trade Liberalization and the Relative Wages for More-Skilled Workers in Costa Rica," Review of Development Economics, Wiley Blackwell, vol. 3(2), pages 140-154, June.
    6. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 367-397.
    7. Goldberg, Pinelopi Koujianou & Pavcnik, Nina, 2005. "Trade, wages, and the political economy of trade protection: evidence from the Colombian trade reforms," Journal of International Economics, Elsevier, vol. 66(1), pages 75-105, May.
    8. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-442, June.
    9. Funkhouser, Edward, 1998. "Changes in the returns to education in Costa Rica," Journal of Development Economics, Elsevier, vol. 57(2), pages 289-317.
    10. Fields, Gary S & Yoo, Gyeongjoon, 2000. "Falling Labor Income Inequality in Korea's Economic Growth: Patterns and Underlying Causes," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 46(2), pages 139-159, June.
    11. Knight, J B & Sabot, R H, 1983. "Educational Expansion and the Kuznets Effect," American Economic Review, American Economic Association, vol. 73(5), pages 1132-1136, December.
    12. Trejos S., Juan Diego, 1999. "Reformas económicas y distribución del ingreso en Costa Rica," Series Históricas 37, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    13. Trejos S., Juan Diego, 2000. "Cambios distributivos durante las reformas económicas en Costa Rica," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 31823, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    14. Horton, Susan & Kanbur, Ravi & Mazumdar, Dipak, 1991. "Labor markets in an era of adjustment : an overview," Policy Research Working Paper Series 694, The World Bank.
    15. Gindling, T H, 1993. "Women's Wages and Economic Crisis in Costa Rica," Economic Development and Cultural Change, University of Chicago Press, vol. 41(2), pages 277-297, January.
    16. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed the Labor Market?," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1169-1213.
    17. Trejos S., Juan Diego, 2000. "Reformas económicas y formación de capital humano en Costa Rica," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 31816, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
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    Cited by:

    1. Gindling, T. H. & Oviedo, Luis, 2008. "Single Mothers and Poverty in Costa Rica," IZA Discussion Papers 3286, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    inequality; Latin America; labor;

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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