Bruno Martorano

Democracy, the New Left and Income Distribution: Latin America over the Last Decade

Since the early 2000s, Latin America has witnessed profound economic, political and distributive changes. While the region experienced slow growth during the period 1990–97, followed by a marked crisis during the ‘lost half decade’ of 1998–2002, between 2003 and 2008 it recorded unprecedented growth in gross domestic product (GDP), of 5.5 per cent a year, the highest since 1967–74 (Ocampo, 2008). Such a steady expansion of output was in part a rebound from the 1998–2002 crisis, but it was supported by a sharp increase in potential output, as investment rates rose by 5 GDP percentage points compared to 2002, reaching 22 per cent of GDP in 2008. From the third quarter of 2008, Latin America was affected by the global financial crisis and particularly by its real effects (a drop in export volumes, terms of trade, remittances, tourist receipts and foreign direct investment, FDI), which reduced GDP by 1.7 per cent in 2009. Yet the region is expected to grow by 4.3 per cent in 2010, faster than any other developing region outside Asia, though still below the average for 2003–08 (CEPAL, 2009b). A second important change recorded during the last decade concerns income distribution. In contrast to the growing polarisation observed during the 1980s and 1990s, between 2003 and 2007 income inequality declined in almost every county of the region.

The Impact of Uruguay's 2007 Tax Reform on Equity and Efficiency

In 2007, the Uruguayan government implemented a new tax reform which introduced a new progressive labour income tax, a flat capital income tax, and reduced some indirect taxes, with the objective of improving fiscal balance, income distribution and economic growth. This paper presents an evaluation of the impact of such tax reform on equity and efficiency on the basis of data derived from the Encuesta Continua de Hogares (ECH) for the years 2006 and 2009. Using a Difference-in-Differences technique, the paper shows that the new tax system lowered inequality by 2 Gini points without producing any discernible disincentive effect. These results contrast with the conclusions of supply side-economics and suggest that suitably designed reforms of direct taxation can simultaneously achieve the goals of equity and efficiency.

Time Discounting and Credit Market Access in a Large-Scale Cash Transfer Programme

Time discounting is thought to influence decision-making in almost every sphere of life, including personal finances, diet, exercise and sexual behavior. In this article we provide evidence on whether a national poverty alleviation program in Kenya can affect inter-temporal decisions. We administered a preferences module as part of a large-scale impact evaluation of the Kenyan Governments Cash Transfer for Orphans and Vulnerable Children. Four years into the program we find that individuals in the treatment group are only marginally more likely to wait for future money, due in part to the erosion of the value of the transfer by inflation. However among the poorest households for whom the value of transfer is still relatively large we find significant program effects on the propensity to wait. We also find strong program effects among those who have access to credit markets though the program itself does not improve access to credit.

Inequality, Power and Participation – Revisiting the Links

Drawing on the contributions from the World Social Science Report 2016, Challenging Inequalities: Pathways to a Just World , this article examines the relationship between economic inequality and political participation. In particular, using the lens of the ‘power cube’ approach ( www.powercube.net ), we argue that understanding the impact of inequality on political participation requires moving beyond the study of its impact on more conventional forms of participation found in voting and ‘voice’ through established or formal democratic processes. Indeed, this relationship is also influenced by hidden and invisible forms of power, at multiple levels from the local to the global, which affect the rules of the game as well as individuals’ aspiration to participate, shaping whether, where and how citizens engage at all. Despite the power of inequality to shape its own consensus, recent evidence also points to the emergence of levels and forms of resistance to inequality outside of traditional channels of participation, which in turn help to expand and prefigure notions of what the new possibilities of change might be. Exploring these dynamics, the article concludes with a brief reflection on possible lessons for activists, policymakers and scholars working to understand, unravel and challenge the knotty intersections of inequality, power and participation.

Structural Change and Wage Inequality in the Manufacturing Sector: Long Run Evidence from East Asia

This paper analyses the long run determinants of wage inequality in the manufacturing sector for a group of East Asian countries that have experienced rapid structural transformations in recent decades. In line with the skill biased technological change hypothesis, our results show that within manufacturing structural change which fosters the participation of higher skilled workers is a strong determinant of the wage premium. However, the paper also highlights an unusual feature of the East Asian model, showing how well-designed education policies, prudent macroeconomic management and selective policies towards foreign capital can help to buffer the pressure of structural change on wage inequality, even in an open economy context.

Catching Up, Structural Transformation, and Inequality: Lessons from Asia

While structural transformation, driven by technological progress, productivity growth, and capital deepening, has contributed to Asia’s sustained rapid growth, its effect on income inequality is uncertain. The central objective of our paper is to empirically examine the effect of structural change on wage inequality in Asia, using industry-level data for three skill groups of workers. Our evidence indicates that structural change, pushed by productivity catch-up with advanced economies, capital deepness, and the shift of the economic structures to more skill-intensive industries, has exacerbated inequality in the region. However, we also find that policy responses, especially investment in education matching the higher demand for skills and competitive exchange rates, can mitigate the increase in inequality.

Lessons from the recent economic crisis: the Australian household stimulus package

This paper provides an impact evaluation analysis of the 2009 Australian Household Stimulus Package, which was composed by three main cash payments: the Back to School Bonus, the Single Income Family Bonus and the Tax Bonus for Working Australians. Using panel data from the 2008 and 2009 HILDA surveys, the results show that these cash payments reduced the risk of poverty and stimulated consumption expenditure. Nonetheless, only the Back to School Bonus and the Single Income Family Bonus were really important in achieving these goals, while the Tax Bonus for Working Australians did not contribute to stimulate consumption and failed to reduce the risk of poverty. Thus, the analysis confirms the crucial role of governments to protect the most vulnerable groups avoiding a dramatic deterioration of social outcomes and favoring a fast economic recovery when interventions are timely and well-targeted.