Search

Begin New Search Topic Income Inequality Political Geography Latin America

1. Does the Minimum Wage Affect Wage Inequality? A Study for the Six Largest Latin American Economies

Author:
Carlo Lombardo, Lucía Ramírez-Leira, and Leonardo Gasparini
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:
Minimum wage (MW) policies are widespread in the developing world and yet their effects are still unclear. In this paper we explore the effect of national MW policies in Latin America’s six largest economies by exploiting the heterogeneity in the bite of the national minimum wage across local labor markets and over time. We find evidence that the MW has a compression effect on the wage distribution of formal workers. The effect was particularly large during the 2000s, a decade of sustained growth and strong labor markets. In contrast, the effect seems to vanish in the 2010s, a decade of much weaker labor markets. We also find suggestive evidence of a lighthouse effect: the MW seems to have an equalizing effect also on the wage distribution of informal workers.
Topic:
Income Inequality, Economy, Labor Market, Minimum Wage, and Informal Economy
Political Geography:
South America and Latin America

2. Income and Consumption Inequality in Latin American Countries

Author:
Sungwoo Hong
Publication Date:
07-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
The recent large-scale protests across Latin America show the seriousness of this inequality in the region. Accumulated complaints about poverty, inequality, and the gap between the rich and the poor are the root causes of the massive protests in Chile that broke out in October 2019 and the demonstrations in Colombia that started in April 2021. This brief looks into the following questions: 1) how profound is inequality in Latin America, and has there been no notable change in its pattern over time? 2) Are the current conditions of poverty and inequality and patterns of inequality the same across Latin American countries?
Topic:
Poverty, Income Inequality, Consumption, and Income
Political Geography:
South Asia and Latin America

3. The Risk of Automation in Latin America

Author:
Irene Brambilla, Andrés César, Guillermo Falcone, Leonardo Gasparini, and Carlo Lombardo
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:
In this paper we characterize workers’ vulnerability to automation in the near future in the six largest Latin American economies as a function of the exposure to routinization of the tasks that they perform and the potential automation of their occupation. We combine (i) indicators of potential automatability by occupation and (ii) worker’s information on occupation and other labor variables. We find that the ongoing process of automation is likely to significantly affect the structure of employment. In particular, unskilled and semi-skilled workers are likely to bear a disproportionate share of the adjustment costs. Automation will probably be a more dangerous threat for equality than for overall employment.
Topic:
Employment, Income Inequality, Economy, and Automation
Political Geography:
Latin America

4. Poverty in Latin America

Author:
Leonardo Gasparini, María Emma Santos, and Leopoldo Tornarolli
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:
Despite some progress in recent decades, poverty remains a top social concern in Latin America. A large proportion of Latin Americans live with very low incomes and are deprived in other fundamental welfare dimensions such as education, health, housing and sanitation. The measurement of income and multidimensional poverty in the region has advanced significantly in recent decades. In particular, there has been a remarkable increase in the availability of microdata from national household surveys and of poverty statistics published by governments and other institutions. Yet, the measurement of poverty in Latin America still has some limitations that should be addressed in the years to come. This chapter discusses the measurement of monetary and multidimensional poverty in Latin America, and documents the main patterns and trends. By providing an updated assessment of the level, changes and characteristics of poverty in the region we expect to contribute to the more ambitious debate on its determinants and policy implications. The rest of the chapter is organized as follows. In Section 2 we describe the data sources and main methodological issues regarding the measurement of income poverty, while in Section 3 we document the main patterns and trends over the recent decades. We repeat the sequence for the measurement of multidimensional poverty: Section 4 for methodological issues and Section 5 for evidence. The paper concludes in Section 6 with some brief concluding remarks.
Topic:
Poverty, Income Inequality, Economy, and Sanitation
Political Geography:
Latin America

5. It takes two to tango: Labour responses to an income tax holiday in Argentina

Author:
Dario Tortarolo, Guillermo Cruces, and Victoria Castillo
Publication Date:
07-2020
Content Type:
Working Paper
Institution:
Nottingham Interdisciplinary Centre for Economic and Political Research (NICEP)
Abstract:
We exploit a large, quasi-randomized, 2.5-year-long income tax holiday to identify intertemporal labor responses of high-wage earners to net wage changes. In August 2013, the Argentine government exempted a group of wage earners from the income tax for 2.5 years while leaving in place the tax on other high-wage earners. Eligibility was based on whether past wage earnings were below a fixed threshold, thus levying sharply different marginal and average tax rates—effectively 0% for workers below the threshold. Using rich population-wide administrative data and a regression discontinuity design, we estimate a precise and very small wage earnings elasticity of 0.017 for this large, salient, and temporary income tax change. Responses are larger for more flexible outcomes (overtime hours) and for more elastic groups (job switchers and managers). We also find avoidance responses from new entrants who faced no tax if their first monthly wage was below the fixed threshold. This strategic entry below the threshold to dodge taxes required coordination with employers. Our findings indicate rigidities in the labor market that require employer-employee cooperation to be overcome for wage earners to be able to respond to tax changes.
Topic:
Economics, Labor Issues, Income Inequality, and Tax Systems
Political Geography:
Argentina and Latin America

6. Is the Future of Central America’s Growth Sustainable?

Author:
Sergio Martinez and Mauricio Garita
Publication Date:
12-2020
Content Type:
Special Report
Institution:
Georgetown Journal of International Affairs
Abstract:
Central America is a region in the Americas with potential for higher economic growth. For the regional economy to grow in a sustainable manner in the years ahead, policymakers must act on three fronts: economic diversification, workforce upskilling, and intra-regional cooperation.
Topic:
Development, Economics, Poverty, Income Inequality, Economic Growth, and Multilateralism
Political Geography:
Latin America and Central America

7. Living with the Neighbors: The Effect of Venezuelan Forced Migration on Wages in Colombia

Author:
Leonardo Peñaloza Pacheco
Publication Date:
07-2019
Content Type:
Working Paper
Institution:
Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:
The aim of this paper is to estimate the causal effect of the migration of Venezuelans to Colombia on the Colombian real wage, since 2016. In the second semester of 2016, the borders between Colombia and Venezuela were reopened after a year of being closed due to a political crisis between the two countries; this re-opening is exploited as an identification strategy. Using data from the Unidad Administrativa Especial de Migraci´on Colombia and the Registro Administrativo de Migrantes Venezolanos in Colombia, it is estimated that the migratory flow of Venezuelans to Colombia increased the Economically Active Population of the border areas of La Guajira and Norte de Santander by approximately 10% and 15%, since its reopening. Differences-in-differences methodology and Synthetic Control Method are implemented and the results show that the increase in labor supply in these regions that resulted from the migratory flow generated a decline in real hourly wages of approximately 6%-9% on average. This decrease in real wages appears to be greater for men as compared to women. There is also evidence of a greater drop in real wages among people with lower levels of qualification and in conditions of informal employment.
Topic:
Economics, Migration, Political Economy, Labor Issues, Employment, and Income Inequality
Political Geography:
Colombia, Latin America, and Venezuela

8. Intra-Household Inequality and Child Welfare in Argentina

Author:
Miriam Berges, Federico Perali, Martina Menon, and Lucía Echeverria
Publication Date:
01-2019
Content Type:
Working Paper
Institution:
Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:
Are two parents and single parents allocating household resources to children in the same way? Which factors affect intra-household inequality? Do mothers re-distribute more income to children as they are more empowered? We focus on child welfare in the context of two parent and single parent families, which is relevant for policy recommendation. We model households behavior in a collective framework, which allows us to understand the rule governing the allocation process between adults and children. Using consumption data from Argentina from three consecutive expenditures surveys (1996, 2004 and 2012) we analyze intra-household behavior over three different socio-economic contexts. We estimate a collective quadratic demand system following a structural approach to identify the fraction of total household expenditure that is devoted to children and adults, exploiting the observability of assignable goods. We provide the first evidence of intra-household inequality and individual poverty levels for Argentina. Our results indicate that family structure matters in the intra-household distribution. We find a positive gender bias in expenditure when children are females for both types of families, and we document that children fare better when mothers have a higher bargaining power in the allocation process, measured by their employment status. Further, we find several features of intra-household behavior which are persistent in time.
Topic:
Economics, Political Economy, Children, Income Inequality, Child Poverty, and Family
Political Geography:
Argentina and Latin America

9. The Impact of the Tax System and Social Expenditure on the Distribution of Income and Poverty in Latin America

Author:
Nora Lustig
Publication Date:
03-2017
Content Type:
Working Paper
Institution:
Center for Global Development (CGD)
Abstract:
This paper presents results on the impact of fiscal policy on inequality and poverty in sixteen Latin American countries around 2010. The countries that redistribute the most are Argentina, Brazil, Costa Rica and Uruguay, and the least, Guatemala, Honduras and Peru. At higher social spending, greater redistribution is achieved, but countries with a similar level of social spending show different levels of redistribution which suggests that other factors such as the composition and targeting of the expenditures are involved in determining the redistributive effect beyond its size. Fiscal policy reduces extreme poverty in twelve countries. However, the incidence of poverty after taxes, subsidies and monetary transfers is higher than the pre-fisc poverty rate in Bolivia, Guatemala, Honduras, and Nicaragua, even when fiscal policy does reduce inequality. Expenditure on pre-school and primary education is equalizing and pro-poor in all countries. Spending on secondary education is equalizing in all countries and also pro-poor in some countries but not all. Expenditure on tertiary education is never pro-poor, but it is equalizing, with the exception of Guatemala, where it is regressive and unequalizing and in Venezuela, where its redistributive effect is zero. Health spending is always equalizing but it is pro-poor only in Argentina, Brazil, Chile, Costa Rica, Ecuador, the Dominican Republic, Uruguay and Venezuela.
Topic:
Civil Society, Poverty, Capitalism, and Income Inequality
Political Geography:
Latin America

10. Is Corruption Really Bad for Inequality? Evidence from Latin America

Author:
Carlyn Dobson and Antonio Rodríguez Andrés
Publication Date:
03-2010
Content Type:
Working Paper
Institution:
Institute for Advanced Development Studies (INESAD)
Abstract:
This paper presents new evidence on the relationship between corruption and income inequality. Using a panel data methodology, we find that lower corruption is associated with higher income inequality in Latin America. This result is in contrast to other empirical studies but it makes sense in Latin America for a number of reasons. The finding of an inverse relationship between inequality and corruption suggests that institutional reform policies by themselves may be misguided.
Topic:
Corruption, Reform, and Income Inequality
Political Geography:
Latin America