Income growth and inequality (South America)

We investigate in this paper whether income growth has played any role on in- equality in all nine young South American democracies during the period 1970-2007. The results, based on dynamic panel time-series analysis, robustly suggest that income growth has indeed played a progressive role in reducing inequality during the period. Moreover, the results suggest that this negative relationship is even stronger in the 1990s and early 2000s, a period in which the continent achieved macroeconomic sta- bilisation, political consolidation and much improved economic performance. On the contrary, during the 1980s (the so-called "lost decade"), the negative income growth experienced by the continent at the time has hit the poor the hardest, or alternatively speaking, it has played a regressive role on inequality. All in all, we suggest that con- sistent growth, and all that it encompasses, is an important equaliser which should not be discarded as a serious option by policy makers interested in a more equal income distribution.

From this paper by Manoel Bittencourt (January 2013).

He explains:

The data set we use covers the period 1970-2007 and all nine South American young democracies, namely: Argentina, Bolivia, Brazil, Chile, Ecuador, Guyana, Paraguay, Peru and Uruguay (T=38 and N=9). The Gini coefficients (GINI) of income inequality come from the UNU-WIDER files. Income per capita (GDP) and the economic growth rates (GROW) come from the Penn World Table (PWT) 6.3 files.

HT: Maximo Rossi.