On the Determinants of Changes in Wage Inequality in Bolivia

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. 1 Terms of use: Documents in AbstractIn recent years, Bolivia has experienced a series of economic and political transformations that have directly affected the labor markets, particularly the salaried urban sector. Real wages have shown strong increases across the distribution, while also presenting a decrease in inequality.Using an intertemporal decomposition approach, we find evidence that changes in demographic and labor market characteristics can explain only a small portion of the observed inequality decline. Instead, the results indicate that the decline in wage inequality was driven by the faster wage growth of usually low-paid jobs, and wage stagnation of jobs that require higher education or are in traditionally highly paid fields. While the evidence shows that the reduction in inequality is significant, we suggest that such an improvement might not be sustainable in the long run, since structural factors associated with productivity, such as workers' level of education, explain only a small portion of these wage changes.

Two Stories of Wage Dynamics in Latin America: Different Policies, Different Outcomes

“…During his presidency, Bolivia has distanced itself from the influence of Western institutions, and he has passed several economic reforms such as the nationalization of important industrial sectors (e.g., hydrocarbons, mining), the creation of social welfare programs and the implementation of anti-discrimination law to protect indigenous populations. Furthermore, President Morales increased royalty taxes for hydrocarbons, providing additional revenue with which to increase public spending (Hicks et al, 2015;Canavire-Bacarreza and Rios-Avila, 2015).…”

“…This paper aims to explore the differences in the evolution of the wage distribution in different political contexts by comparing two developing Latin American countries, Bolivia and Colombia, that have taken different political paths. Since 2006, when Evo Morales became president of Bolivia, the country has shifted toward left-wing policies, such as the expansion of the public sector and increased levels of social assistance (Canavire-Bacarreza and Rios-Avila, 2015). During the same time frame, Colombia has implemented policies to foster economic growth through free-market principles and improved national security (Aristizábal-Ramírez et al, 2015).…”