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Deconstructing the decline in inequality in Latin America

Author

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  • Lustig, Nora
  • Lopez-Calva, Luis F.
  • Ortiz-Juarez, Eduardo

Abstract

Inequality in Latin America unambiguously declined in the 2000s. The Gini coefficient fell in 16 of the 17 countries where there are 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

  • Lustig, Nora & Lopez-Calva, Luis F. & Ortiz-Juarez, Eduardo, 2013. "Deconstructing the decline in inequality in Latin America," Policy Research Working Paper Series 6552, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6552
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    More about this item

    Keywords

    Inequality; Poverty Impact Evaluation; Labor Markets; Population Policies; Labor Policies;
    All these keywords.

    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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