Decomposing the Recent Inequality Decline in Latin America

Over the past decade, 12 of 14 Latin American countries have experienced a reduction in inequality. Based on a series of counterfactual simulations, the observed changes in inequality are decomposed in order to identify the main determinants of inequality. In contrast to methods that focus on aggregate summary statistics, the method adopted in this paper generates counterfactual distributions, so that the analysis can account for changes related to demographics, occupation, labor earnings and transfers, pensions, and other nonlabor income sources. The results show that for the majority of countries in the sample, the most important contributor to the observed decline in inequality has been the relatively strong growth in labor earnings at the bottom of the income distribution. In particular, most of the reduction in inequality can be attributed to an increase in earnings per hour for the bottom of the income distribution. The paper also contributes to the literature on inequality in Latin America by providing the Shapley-Shorrocks value of this decomposition.

Bibliographic Details

Main Authors:	Sanfelice, Viviane, Azevedo, Joao Pedro, Inchauste, Gabriela
Language:	English en_US
Published:	World Bank, Washington, DC 2013-12
Subjects:	ACCOUNTING, ADJUSTMENT PERIOD, ANNUALIZED CHANGE, CASH TRANSFER PROGRAMS, COL, COMMODITY, COMMODITY PRICES, COUNTERFACTUAL, COUNTERFACTUALS, DECLINING INEQUALITY, DECOMPOSITION TECHNIQUES, DEMAND-SIDE, DEMOGRAPHIC, DEMOGRAPHIC CHANGES, DEVELOPING COUNTRIES, DEVELOPING WORLD, DEVELOPMENT ECONOMICS, DISTRIBUTION OF INCOME, DISTRIBUTIONAL CHANGES, DIVIDEND, DRIVERS, ECONOMIC EQUILIBRIUM, ECONOMIC GROWTH, ECONOMIC INEQUALITY, ECONOMIC REVIEW, EMPIRICAL EVIDENCE, EMPIRICAL REGULARITIES, EMPLOYMENT, EQUALIZING EFFECT, FEMALE LABOR, FEMALE LABOR FORCE, GDP, GENDER DIMENSIONS, GINI COEFFICIENT, GROWTH RATE, HARMONIZATION, HOUSEHOLD INCOME, HOUSEHOLD INCOMES, HOUSEHOLD MEMBERS, HOUSEHOLD SURVEYS, INCOME, INCOME DISTRIBUTION, INCOME DISTRIBUTIONS, INCOME EFFECT, INCOME INEQUALITY, INCOME SOURCES, INCOMES, INCREASING INCOME INEQUALITY, INEQUALITY, INEQUALITY MEASURE, INEQUALITY MEASURES, INEQUALITY REDUCTION, INTERNATIONAL MARKETS, LABOR ECONOMICS, LABOR FORCE, LABOR FORCE PARTICIPATION, LABOR INCOME, LABOR MARKET, LABOR MARKETS, LABOR SUPPLY, MINIMUM WAGES, OBSERVED CHANGES, OBSERVED REDUCTIONS, PATH DEPENDENCE, PENSION, PENSIONS, PER CAPITA GROWTH, PER CAPITA INCOME, POLICY DISCUSSIONS, POLICY ISSUES, POLICY RESEARCH, POLITICAL ECONOMY, POOR, POVERTY DYNAMICS, POVERTY MEASURES, POVERTY OUTCOMES, POVERTY REDUCTION, PRIVATE TRANSFERS, PRODUCTIVITY, PROGRAMS, PUBLIC POLICY, PUBLIC TRANSFERS, QUALITY GROWTH, REDUCING INEQUALITY, RELATIVE DEMAND, RELATIVE IMPORTANCE, SIMULATIONS, SKILLED LABOR, SKILLED WORKERS, SOCIAL TRANSFERS, STRUCTURAL REFORMS, TECHNOLOGICAL CHANGE, TRANSFER PROGRAMS, WAGE INEQUALITY,
Online Access:	http://documents.worldbank.org/curated/en/2013/12/18607445/decomposing-recent-inequality-decline-latin-america https://hdl.handle.net/10986/16931
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