Political Risk Latin America Blog @PolRiskLatam

Declining Latin American inequality: Market forces or state action?

Posted in News and Articles, Political Risk by politicalrisklatam on September 7, 2010

by Luis Lopez Calva & Nora Lustig for Vox, June 6th, 2010.

Income inequality in Latin America has declined steadily in recent years, after rising throughout the 1990s. This column presents one of the first attempts to understand why, exploring the forces behind a diminished earnings gap and increased government transfers. It says that that further redistribution would benefit both equality and growth.

Latin America is always singled out because of its high and persistent income inequality.With a Gini coefficient of 0.53 in the mid-2000s, Latin America was 18% more unequal than Sub-Saharan Africa, 36% more unequal than East Asia and the Pacific, and 65% more unequal than the high-income countries.

But after rising throughout the 1990s, income inequality in Latin America declined steadily between 2000 and 2007. This is in stark contrast with trends experienced in, for example, China, India, and South Africa. Of the 17 Latin American countries for which comparable data are available, 12 experienced a decline in their Gini coefficient. The average decline for the 12 countries was 1.1% a year. Here we present the findings of an in-depth study of Argentina, Brazil, Mexico, and Peru (Lopez-Calva and Lustig 2010). This study is among the first attempts to understand why inequality has fallen in Latin America since 2000. (continue reading… )


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