Over the past decades, inequality has risen not just in advanced economies but also in many emerging market and developing economies, becoming one of the key global policy challenges. And throughout the 20th century, Latin America was associated with some of the world’s highest levels of inequality. Yet something interesting happened in the first decade and a half of the 21st century. Latin America was the only region in the World to have experienced significant declines in inequality in that period. Poverty also fell in Latin America, although this was replicated in other regions, and Latin America started from a relatively low base. Starting around 2014, however, and even before the COVID-19 pandemic hit, poverty and inequality gains had already slowed in Latin America and, in some cases, gone into reverse. And the COVID-19 shock, which is still playing out, is likely to dramatically worsen short-term poverty and inequality dynamics. Against this background, this departmental paper investigates the link between commodity prices, and poverty and inequality developments in Latin America.

This volume documents and explains the reduction of income inequality that has taken place in the majority of Latin American countries over the last decade.

From the United States to the United Kingdom and from China to India, growing inequality has led to social discontent and the emergence of populist parties, also contributing to economic crises. We urgently need a better understanding of the roots and costs of these income gaps. The Costs of Inequality draws on the experience of Latin America, one of the most unequal regions of the world, to demonstrate how inequality has hampered economic growth, contributed to a lack of good jobs, weakened democracy, and led to social divisions and mistrust. In turn, low growth, exclusionary politics, violence and social mistrust have reinforced inequality, generating various vicious circles. Latin America thus provides a disturbing image of what the future may hold in other countries if we do not act quickly. It also provides some useful lessons on how to fight income concentration and build more equitable societies.

Abstract: Income inequality in Latin America ranks among the highest in the world. It can be traced back to the unequal distribution of assets (especially land and education) in the region. But the extent to which asset inequality translates into income inequality depends on the redistributive capacity of the state. This paper documents the performance of Latin American fiscal systems from the perspective of income redistribution using newly-available information on the incidence of taxes and transfers across the region. The findings indicate that: (i) the differences in income inequality before taxes and transfers between Latin America and Western Europe are much more modest than those after taxes and transfers; (ii) the key reason is that, in contrast with industrial countries, in most Latin American countries the fiscal system is of little help in reducing income inequality; and (iii) in countries where fiscal redistribution is significant, it is achieved mostly through transfers rather than taxes. These facts stress the need for fiscal reforms across the region to further the goal of social equity. However, different countries need to place different relative emphasis on raising tax collection, restructuring the tax system, and improving the targeting of expenditures.

Although inequality in Latin America ranks among the worst in the world, it has notably declined over the last decade, offset by improvements in health care and education, enhanced programs for social assistance, and increases in the minimum wage. In Democracy and the Left, Evelyne Huber and John D. Stephens argue that the resurgence of democracy in Latin America is key to this change. In addition to directly affecting public policy, democratic institutions enable left-leaning political parties to emerge, significantly influencing the allocation of social spending on poverty and inequality. But while democracy is an important determinant of redistributive change, it is by no means the only factor. Drawing on a wealth of data, Huber and Stephens present quantitative analyses of eighteen countries and comparative historical analyses of the five most advanced social policy regimes in Latin America, showing how international power structures have influenced the direction of their social policy. They augment these analyses by comparing them to the development of social policy in democratic Portugal and Spain. The most ambitious examination of the development of social policy in Latin America to date, Democracy and the Left shows that inequality is far from intractable—a finding with crucial policy implications worldwide.

Concern about the pervasiveness of poverty and income inequality in Latin America goes beyond the issue of social justice. The persistence of mass poverty and inequality pits different social groups against one another and leads to a polarization that makes consistent economic policy formation difficult. National productivity may also suffer in economies with poorly educated workforces lacking adequate health care. Statistics on poverty and inequality in Latin America are rudimentary and often conflicting. Yet it is known that poverty became more widespread in the region during the last decade as it experienced economic decline. About 180 million people, or two out of every five in the area, are now living in poverty—some 50 million more than in 1980. It is also known that income and wealth are far more unequally distributed in Latin America than in most other developing regions. This book provides a much-needed assessment of how poverty, inequality, and social indicators have fared in several Latin American countries over the past decade. Experts from Latin America and the U.S. focus attention on the extent of poverty and inequality and how they have been affected by the debt crisis and adjustment of the 1980s. They explain that issues of poverty and inequality were neglected as governments in Latin America struggled to restore stability and growth to their economies. Social sector spending declined sharply, affecting both the quality and quantity of services provided. The contributors examine how poverty and inequality are—or are not—being addressed in each country. They also explore the viability of alternative approaches to combating poverty and reducing inequality. They explain that virtually no one denies that governments must take a leading role in the provision of health, education, and other social services. Yet there are sharp debates--over the compatibility of social spending with economic adjustment and stabilization; the priority of social expenditures in relation to other governmental spending; the allocation of funds among different social programs; who should, and should not, benefit; and who should pay the costs. They show that the poor and middle sectors had to pay dearly because their governments, the international community, and the families themselves were not prepared to deal with austerity. The book contains eleven chapters by contributors from universities and research institutions in the U.S. and Latin America, as well as from international financial organizations. It is the result of a project cosponsored by Inter-American Dialogue.

One out of every five Latin Americans or around 130 million people have never known anything but poverty, subsisting on less than US$4-a-day throughout their lives. These are the region ́s chronically poor, who have remained so despite unprecedented inroads against poverty in Latin America and the Caribbean since the turn of the century. Left Behind: Chronic Poverty in Latin America and the Caribbean takes a closer look at the region’s entrenched poor, who and where they are, and how existing policies need to change in order to effectively assist them. The book shows significant variations of rates of chronic poverty both across and within countries. Within a single country, some regions show incidence rates up to eight times higher than the lowest. Despite the higher rates of chronic poverty in rural areas, chronic poverty is as much an urban as a rural issue. In fact, considering absolute numbers, urban areas in many countries, including Chile, Brazil, Mexico, Colombia and the Dominican Republic, have more chronic poor than rural areas. Undoubtedly the region has come a long way during the decade in terms of poverty reduction, guided by a mix of sustained growth and increased levels in amounts and quality of public spending and programs targeted directly or indirectly to the chronic poor. While improving endowments and the context where the chronic poor live is a necessary condition going forward, the decade’s experience suggests that it may not be enough to reach the chronic poor. The book posits that refinements to the existing policy toolkit †“ as opposed to more programs †“ may come a long way in helping the remaining poor. These refinements include intensifying efforts to improve coordination between different social and economic programs, which can boost the income generation process and deal with the intergenerational transmission of chronic poverty by investing in early childhood development. Equally important though, there is an urgent need to adapt programs to directly address the psychological toll of chronic poverty on people’s mindset and aspirations, which currently undermines the effectiveness of the existing policy efforts.

This book is open access under a CC BY 4.0 license. This book brings together a range of ideas and theories to arrive at a deeper understanding of inequality in Latin America and its complex realities. To so, it addresses questions such as: What are the origins of inequality in Latin America? How can we create societies that are more equal in terms of income distribution, gender equality and opportunities? How can we remedy the social divide that is making Latin America one of the most unequal regions on earth? What are the roles played by market forces, institutions and ideology in terms of inequality? In this book, a group of global experts gathered by the Institute for the Integration of Latin America and the Caribbean (INTAL), part of the Inter-American Development Bank (IDB), show readers how various types of inequality, such as economical, educational, racial and gender inequality have been practiced in countries like Brazil, Bolivia, Chile, Mexico and many others through the centuries. Presenting new ideas, new evidence, and new methods, the book subsequently analyzes how to move forward with second-generation reforms that lay the foundations for more egalitarian societies. As such, it offers a valuable and insightful guide for development economists, historians and Latin American specialists alike, as well as students, educators, policymakers and all citizens with an interest in development, inequality and the Latin American region.

The relationship between socioeconomic inequality and democratic politics has been one of the central questions in the social sciences from Aristotle on. Recent waves of democratization, combined with deepened global inequalities, have made understanding this relationship ever more crucial. In The Great Gap, Merike Blofield seeks to contribute to this understanding by analyzing inequality and politics in the region with the highest socioeconomic inequalities in the world: Latin America. The chapters, written by prominent scholars in their fields, address the socioeconomic context and inequality of opportunities; elite culture, public opinion, and media framing; capital mobility, campaign financing, representation, and gender equality policies; and taxation and social policies. Aside from the editor, the contributors are Pablo Alegre, Maurício Bugarin, Daniela Campello, Anna Crespo, Francisco H. G. Ferreira, Fernando Filgueira, Liesl Haas, Sallie Hughes, Juan Pablo Luna, James E. Mahon Jr., Juliana Martínez Franzoni, Adriana Cuoco Portugal, Paola Prado, Elisa P. Reis, Luis Reygadas, Sergio Naruhiko Sakurai, and Koen Voorend.

A comprehensive Statistical Appendix provides regional and country-by-country data in such areas as GDP, manufacturing, sector productivity, prices, trade, income distribution and living standards."--BOOK JACKET.