Productivity, social expenditure and income distribution in Latin America

Abstract

RESUMO: Este artigo discute o papel das instituições e das mudanças estruturais sobre a desigualdade de renda. Argumenta-se que enquanto o gasto social e a transferência de renda são fatores cruciais à melhora da distribuição de renda, a continuidade desse processo depende de mudanças estruturais. A importância relativa dessas variáveis em diferentes países é avaliada e uma tipologia é sugerida. Argumenta-se que os países mais igualitários combinam instituições em favor da redistribuição e estruturas produtivas intensivas em conhecimento. Na Amé-rica Latina, instituições e estrutura produtiva falham em promover a igualdade, o que explica seus elevados níveis de desigualdade. Baseado em uma amostra de países em desenvolvimento e desenvolvidos para o período 1990-2010, este artigo apresenta evidência empírica que suporta este argumento. Instituições que favorecem a distribuição são medidas pelo gasto social como uma porcentagem do PIB, enquanto o papel da estrutura produtiva é medido por indicadores de intensidade tecnológica e pela evolução da produtividade do trabalho. A intensidade tecnológica, por sua vez, é capturada por dois indicadores: o Índice de Complexidade Econômica e o Índice de Intensidade Tecnológica da CEPAL. PALAVRAS-CHAVE: Distribuição de renda; mudança estrutural; gasto social.ABSTRACT: This paper discusses the role of institutions and structural change in shaping income inequality. It is argued that while social expenditure and direct redistribution are crucial for improving income distribution, sustainable equality requires structural change. The relative importance of these variables in different countries is analyzed and a typology suggested. It is argued that the most equal countries in the world combine strong institutions in favor of redistribution and knowledge-intensive production structures that sustain growth and employment in the long run. Both institutions and the production structure in Brazilian Journal of Political Economy, vol 37, nº 4 (149), pp 660-679, October-December/2017 Latin America fail to foster equality and this explains its extremely high levels of inequality. The paper presents empirical evidence that supports this view, based on a sample of developed and developing countries for the period 1990-2010. Institutions for redistribution are captured through social expenditures as a percentage of GDP, while the role of structural change is captured by indicators of the technological intensity of production and the evolution of labor productivity. The technological intensity of the production structure is proxied through two indicators, the Economic Complexity Index and the ECLAC Index of Technological Intensity.

Public family spending, labour productivity, income inequality and poverty gap in the group of seven countries

“…Worthy of note is that health expenditures have positive relationships with poverty and inequality; an indication that the country's health reforms are intrinsically anti-poor. Cimoli et al (2017) examined productivity in the contexts of social expenditure and income distribution in Latin America. The study showed that though social expenditure and direct redistribution are crucial for improving income distribution, and that sustainable equality requires structural change.…”

“…Hitherto, substantial studies concentrated on productivity in general, and labour productivity in particular; and just few analysed income inequality and pov-erty in relation to either economic growth (Charles, 1982;Blank and Blinder, 1986;Blank and Card, 1993;Khan et al, 2014;Liu 2017) or labour productivity (Chinbui et al, 1993;Cimoli et al, 2017) in the context of regional groupings of either developing or developed countries. Therefore, this study examines the effectiveness of familycentred public spending and some other macroeconomic indices in reducing income inequalities and poverty gap in the Group of Seven (G7) countries, with reference to the forty-year period, 1980-2019.…”

Income distribution and external constraint: Brazil in the commodities boom

“…On the other hand, when profi t (wage) share is high (low), fi rms have suffi cient resources to invest, but the incentives to invest are low (for an empirical analysis, see Aghion et al, 2005). Finally, Cimoli et al (2015), we assume that public investment has a positive impact on technological capabilities. Public investment that supports innovation and diffusion of technologies is central for catching-up.…”

“…This path of falling inequality, low productivity and rising dependence on primary goods is unsustainable (see Cimoli et al, 2015). If productivity does not grow steadily, the potential to increase social expenditure to fi ght poverty and encourage social inclusion will fi nd a ceiling.…”

“…This paper discusses, in a BOP-dominated macrodynamic model based on Ribeiro et al (2016), the impact of Brazilian distributive policies on the BOP-constrained rate of growth. Moreover, this paper includes a government sector as in Cimoli et al (2015), which tax profi ts and spends in distributive programs and productive investment. As a result, the optimal balance between the two types of expenditures is discussed.…”