Monday, November 19, 2018

Income inequality and the commodity boom in Latin America

I just finished a paper exploring the links between income inequality and the commodity boom in Latin America.  I am still surprised with how many people claims that "the reduction of inequality was thanks to the commodity boom" without realizing that those two processes usually don't go together.   While the paper does not use new data, it does try to use all the evidence available (both descriptive statistics and secondary sources) to conclude that governments managed the commodity boom better than in the past in the short run, but did not promote any radical change in the long run.  The paper also presents data based on household surveys with new studies based on taxes, which very few people have done so far.

Anyway, it would be great to receive comments on it if anyone has time to read it.  Below is the abstract and here the paper:


Past historical experience and both orthodox and heterodox economic theories lead us to expect a positive relationship between income inequality and commodity booms.  Yet most of the literature has not been surprised by the fact that Latin America’s recent improvement in income distribution coincided with a rapid growth in commodity exports.  How was this positive outcome possible? Did income distribution improve because of higher commodity revenues or despite them? This paper answers these questions—seldom explored in the literature—through an extensive discussion of economic studies, descriptive statistics and policy changes. The paper shows that the reduction of inequality took place among the bottom 90% of the population only, while the income share of the wealthy remained stable when properly measured. I show that the reduction in the Gini coefficients resulted from a combination of better labour market outcomes—which favoured unskilled workers more than skilled ones—and better distributive and redistributive policies. The paper concludes that political pressures forced most Latin American governments to manage the commodity boom better than in the past in the short run but did not lead to significant transformations in the region’s elite-driven development model.

2 comments:

Unknown said...

Dear Mr. Sánchez-Ancochea:
The link to this paper is not working.
Thanks,

Diego Sánchez-Ancochea said...

Thanks for letting me know. It should be working now.