The evolution of inequality in Latin America in the 21st century: What are the patterns, drivers and causes?

Abstract

The paper analyses the evolution of inequality for the largest economies of the Latin American region in the 21 st century, with separate consideration of income and wealth. The drivers of changes in inequality and possible underlying causes are examined, including the role of the new wave of leftist governments. The evidence reveals that income inequality decreased, though wealth inequality displayed a much less homogeneous pattern. Statistically, the decrease in inequality is associated with labour market changes, and especially with State redistribution through subsidies. Wealth inequality is mainly correlated with the change in the share of financial wealth. A possible causal interpretation is that the symbolic victories of the new left may have inflated social pressures, mostly in the presence of rents generated by the commodity boom.