Decomposing the Recent Inequality Decline in Latin America
Over the past decade, 12 of 14 Latin American countries have experienced a reduction in inequality. Based on a series of counterfactual simulations, the observed changes in inequality are decomposed in order to identify the main determinants of ine...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2013/12/18607445/decomposing-recent-inequality-decline-latin-america http://hdl.handle.net/10986/16931 |
| Summary: | Over the past decade, 12 of 14 Latin
American countries have experienced a reduction in
inequality. Based on a series of counterfactual simulations,
the observed changes in inequality are decomposed in order
to identify the main determinants of inequality. In contrast
to methods that focus on aggregate summary statistics, the
method adopted in this paper generates counterfactual
distributions, so that the analysis can account for changes
related to demographics, occupation, labor earnings and
transfers, pensions, and other nonlabor income sources. The
results show that for the majority of countries in the
sample, the most important contributor to the observed
decline in inequality has been the relatively strong growth
in labor earnings at the bottom of the income distribution.
In particular, most of the reduction in inequality can be
attributed to an increase in earnings per hour for the
bottom of the income distribution. The paper also
contributes to the literature on inequality in Latin America
by providing the Shapley-Shorrocks value of this decomposition. |
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