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Inequality in Latin America : Determinants and ConsequencesLatin America is together with Sub-Saharan Africa the most unequal region of the world. This paper documents recent inequality trends in the Latin American region, going beyond traditional measures of income inequality. The paper also reviews some of the explanations that have been put forward to understand the current situation, and discusses why reducing income inequality should be an important policy priority. In particular, the authors discuss channels through which inequality can affect growth and output volatility. On the whole, the analysis suggests a two-pronged approach to reduce inequality in the region that combines policies aimed at improving the distribution of assets (especially education) with elements aimed at improving the capacity of the state to redistribute income through taxes and transfers.
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Inequality in Latin America : Breaking with History?With the exception of Sub-Saharan Africa, Latin America and the Caribbean has been one of the regions of the world with the greatest inequality. This report explores why the region suffers from such persistent inequality, identifies how it hampers development, and suggests ways to achieve greater equity in the distribution of wealth, incomes and opportunities. The study draws on data from 20 countries based on household surveys covering 3.6 million people, and reviews extensive economic, sociological and political science studies on inequality in Latin America. To address the deep historical roots of inequality in Latin America, and the powerful contemporary economic, political and social mechanisms that sustain it, Inequality in Latin America and the Caribbean outlines four broad areas for action by governments and civil society groups to break this destructive pattern: 1) Build more open political and social institutions, that allow the poor and historically subordinate groups to gain a greater share of agency, voice and power in society. 2) Ensure that economic institutions and policies seek greater equity, through sound macroeconomic management and equitable, efficient crisis resolution institutions, that avoid the large regressive redistributions that occur during crises, and that allow for saving in good times to enhance access by the poor to social safety nets in bad times. 3) Increase access by the poor to high-quality public services, especially education, health, water and electricity, as well as access to farmland and the rural services. Protect and enforce the property rights of the urban poor. 4) Reform income transfer programs so that they reach the poorest families.
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Trade and Civil Conflict : Revisiting the Cross-Country EvidenceThis paper revisits and expands the evidence on the impact of trade shocks on intra-state conflict with a large sample of developing countries in the 1960-2010 period. The results suggest that increases in the prices of a country's exported commodities raise the country's risk of civil conflict and its duration. The effect on conflict risk is mainly driven by the price of point-source commodities, in line with the rapacity effect theory of conflict. However, the paper does not find support for the opportunity cost theory via exported commodities. The analysis also finds that intense trading with contiguous countries is associated with lower duration of intra-state conflict, consistent with the idea that such trade reduces the incentive of contiguous countries to fuel conflict in their neighbor. Trading with neighbors is also associated with a lower risk of conflict, when such trade occurs under trade agreements. By contrast, neither imported commodity prices nor the economic cycle in export markets appears to exert any influence on the probability or duration of conflict. The paper identifies several conditions under which changes in the value of exported commodities cease to matter for conflict probability.