The Inequality Story in Latin America and the Caribbean: Searching for an Explanation

Torre, Augusto de la; Messina, Julián; Silva, Joana

doi:10.1007/978-3-319-44621-9_13

Cited by 12 publications

(11 citation statements)

References 36 publications

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“…Lower wage inequality is the main driver behind the decline in household income inequality. However, as pointed by De la Torre et al (2017) "the contribution of nonlabor income cannot be disregarded as minor". In fact, many countries in the region have made important progress in reforming their tax-benefit systems to achieve larger redistribution, through more progressive income taxation and higher cash transfers to vulnerable populations.…”

Section: Discussionmentioning

confidence: 99%

“…Despite the little progressivity characterizing tax-benefit systems in Latin America, their redistributive role has grown over the past two decades, notably with the introduction of conditional cash transfers targeting low income families (Abad and Lindert 2017;De la Torre et al 2017). According to Cord et al (2014), around one-third of changes in income inequality in Latin America in the 2000s can be attributed to the redistributive role of tax-benefit systems.…”

Section: Related Literaturementioning

confidence: 99%

“…Recent studies have shown that the main driver must have been the reduction in wage inequality (Abad and Lindert 2017;De la Torre et al 2017). But, changes in tax-benefit systems, in the form of more progressive income taxation and higher cash transfers to vulnerable populations, have also played a role.…”

Section: Introductionmentioning

confidence: 99%

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Learning from your neighbor: tax-benefit systems swaps in Latin America

2017

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Over the last decades, Latin American countries have experienced a noticeable decrease in income inequality. While this trend is mainly associated with a decline in wage inequality, progressive reforms of the tax-benefit systems of the region may have played a role. While redistributive systems in Latin America are still in their infancy, they are constantly expanding and do so at different pace in the region. To investigate this point in a comparative way, the present study exploits newly developed tax-benefit microsimulation models for Ecuador and Colombia. These two neighboring countries show contrasted situations in terms of income distribution and we characterize the extent to which this difference is explained by different tax-benefit systems. The comparative nature of our microsimulation models allows us to swap tax-benefit systems between countries to produce counterfactual simulations whereby the system of a country is applied to the population of the other. In this way, we can decompose the total country difference in income distribution to extract the role of different tax-benefit policies. We confirm that the Ecuadorean system is more redistributive and quantify the difference: if the Ecuadorean system was applied to the Colombian population, the Gini coefficient would be reduced by 1.7 points in Colombia. Headcount poverty would decrease by around 10% and the intensity of poverty by up to 14.7%. This analysis contributes to the recent literature on the redistributive role of taxbenefit systems in Latin America and highlights the role of microsimulation techniques to show how countries in the region can learn from each other in order to improve social protection and reduce income inequality.

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Section: Discussionmentioning

confidence: 99%

Section: Related Literaturementioning

confidence: 99%

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Learning from your neighbor: tax-benefit systems swaps in Latin America

2017

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“…A significant number of scholars have been attracted to the task of identifying the major political and economic determinants of the historical shift in income inequality in Latin America since the 2000s (Anderson and Palacio 2014;Astorga 2014;Cornia 2012Cornia , 2014aGonzález and Martner 2012;Lustig et al 2013;McLeod and Lustig 2011;Tsounta and Osueke 2014;De la Torre 2014). Regarding the possible political determinants, scholars have studied in particular the effects of democracy and progressive government on reducing inequality (McLeod and Lustig 2011;Milanovic and Muñoz de Bustillo 2008;Montecino 2011).…”

Section: Income Inequality In Latin America: a Contemporary Debatementioning

confidence: 99%

“…This historical shift in inequality in Latin America has attracted considerable research aiming to uncover the causes of this change (De la Torre 2014;Salazar 2014;. Contributing to this recent literature, this chapter provides new knowledge about the role of fiscal policy on income redistribution in the Latin American context.…”

Section: Introductionmentioning

confidence: 99%