Mar 2, 2012


Inequality has decreased in Latin America. But not so in Honduras. Klasen, Otter and Villalobos examine this in the new paper (February 2012): The dynamics of inequality change in a highly dualistic economy: Honduras, 1991-2007.
Using annual household surveys, we document first rising inequality between 1991-2005, which is followed by falling inequality thereafter.
According to the authors, the driving force behind this was the overvaluation of the currency that affected agricultural exports from rural areas where 80% of the extremely poor live [coffee during the 1990s and bananas during the 2000s]. The other factor was the "poor commodity process for Honduras’ agricultural exports." On the other hand, inequality  decreased in Honduras from 2005 to 2007 due mainly to a commodity boom and remittances [government social transfers played a small role].  
Cornia (January 2012) argues that inequality has decreased in LA because of: 

. . . [a] drop in the skill premium following a rapid expansion of secondary education, and the adoption of a new development model by a growing number of left-of-centre governments which emphasizes fiscally-prudent but more equitable macroeconomic, tax, social expenditure and labour policies.
Cornia claims:
For the region as a whole, improvements in terms of trade, migrant remittances, FDI and world growth played a less important role than expected although their impact was perceptible in countries where such transactions were sizable.
 HT: Catalina Granda Carvajal.

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