attribute greater importance to social issues while avoiding the
populist excesses of the 1980s. However, the recent coup in
Honduras, the election of a centre-right president in Panama in July
2009, and the poor results of the Justicialista Party of President
Fernandez during the July 2009 parliamentary elections in
Argentina, may signal that such trend has reached its peak.
To what extent are these changes explained by shifts in external
economic conditions, and to what extent are they instead the result
of the adoption of new economic and social policies in the region,
especially those adopted by LOC countries? To what extent are the
distributive improvements recorded since 2003 likely to be
overturned by the present crisis? These are the main issues explored
in this paper. Part 2 reviews the recent decline in income inequality.
Part 3 discusses the factors that could explain it, i.e. improved
external conditions, a positive business cycle, a fall in educational
inequality, and changes in macroeconomic, labor and social policies.
Part 4 tests econometrically the relative importance of these factors,
while Part 5 analyzes the impact of the financial crisis and uses the
econometric model estimated in part 4 to predict the inequality
changes that may be expected in 2008 and 2009.
- The Latin American income distribution in historical
perspective
With the exception of Uruguay and Argentina, in the early-to-mid
1950s, Gini coefficients in Latin America ranged between 0.45
and 0.60, among the highest in the world (Altimir 1996). This
acute income polarization was rooted in a n unequal distribution
of land, industrial assets and educational opportunities that
benefited a tiny agrarian, mining and commercial oligarchy. The
rapid G D P growth which followed the adoption of the import
substitution strategy in the 1950s and 1960s had, on average, a
disequalizing impact. In the 1970s, however, inequality declined
moderately in most of the region except for the Southern Cone
(Altimir 1993, Gasparini et al 2009), where an extreme version of
neo-liberal reforms had been implemented by the juntas. The
combination of a rise in inequality over the 1950s-1960s, and a
decline over the 1970s, meant that by 1980 all medium-to-large