Inequality Trends and their Determinants: Latin America over 1990-2010

By:	Giovanni Andrea Cornia (Università degli Studi di Firenze, Dipartimento di Scienze Economiche)
URL:	http://d.repec.org/n?u=RePEc:frz:wpaper:wp2012_02.rdf&r=ltv
The paper reviews the steady and widespread decline in income inequality which has taken place in most of Latin America over 2002-10 and which––if continued for another 2-3 years––would reduce the average regional income inequality to pre-liberalization levels. The paper then focuses on the factors, which may explain such inequality decline. A review of the literature and an econometric test indicate that a few complementary factors played an important role in this regard, including a drop in the skill premium following a rapid expansion of secondary education, and the adoption of a new development model by a growing number of left-of-centre governments which emphasizes fiscally-prudent but more equitable macroeconomic, tax, social expenditure and labour policies. For the region as a whole, improvements in terms of trade, migrant remittances, FDI and world growth played a less important role than expected although their impact was perceptible in countries where such transactions were sizeable.
Keywords:	income inequality, human capital inequality, policy regimes, external conditions, Latin America
JEL:	D31