Luis Felipe López-Calva

Declining Inequality in Latin America in the 2000s: The Cases of Argentina, Brazil, and Mexico

Between 2000 and 2010, the Gini coefficient declined in 13 of 17 Latin American countries. The decline was statistically significant and robust to changes in the time interval, inequality measures, and data sources. In-depth country studies for Argentina, Brazil, and Mexico suggest two main phenomena underlie this trend: a fall in the premium to skilled labor and more progressive government transfers. The fall in the premium to skills resulted from a combination of supply, demand, and institutional factors. Their relative importance depends on the country.

Measuring the Distribution of Human Development: methodology and an application to Mexico

The Human Development Index (HDI) improves upon per‐capita Gross Domestic Product as an indicator of development by incorporating information on health and education. However, like its predecessor, it fails to account for the inequality with which the benefits of development are distributed among the population. Subsequent work by Anand and Sen (1993) and Hicks (1997) has led to a useful distribution‐sensitive measure of human development, but at the cost of a key property of the HDI that ensures consistency between regional and aggregate analyses. This paper presents a new parametric class of human develop-ment indices that includes the original HDI as well as a family of distribution sensitive indices that satisfy all the basic properties for an index of human development. An empirical application using the year 2000 Mexican Population Census data shows how the new measures can be applied to analyze the distribution of human development at the national level and for individual states.

Chapter Sixteen – Functionings and Capabilities

Traditional economics identifies a persons well-being with the goods and services the person consumes and the utility that the person gets from such consumption. This, in turn, has led to the widely used approach of welfarism that uses individual utilities as ingredients for evaluating a societys aggregate welfare. This approach has long been contested as being too restrictive in its view of what constitutes human well-being and for its commodity fetish. What has injected new life into this critique is the emergence of an alternative approach, which replaces the traditional concern for commodities and utility with functionings and capabilities. While the origins of this “capabilities approach” go back to the works of John Stuart Mill, Adam Smith, and, in spirit if not in form, to Aristotle, it was the seminal contribution of Amartya Sen in the form of his 1979 Tanner Lectures that gave it shape and structure. Subsequent works by Sen and an enormous outpouring of writing by various authors in economics, philosophy, and sociology have made this a major field of inquiry, which has also led to important practical applications. The present chapter is a survey of this new field of study. In Sens terminology a “functioning” is what an individual chooses to do or to be, in contrast to a “commodity,” which is an instrument which enables her to achieve different functionings. While functioning is central to the notion of human well-being, it is not merely the achieved functionings that matter but the freedom that a person has in choosing from the set of feasible functionings, which is referred to as the persons “capability.” Beginning with a discussion of these ideas in history, the present chapter tries to present a comprehensive review of the recent literature, including formalizations and applications. It is important to recognize that a full formalization may not be feasible, since there are important dimensions of life that are germane to the capabilities approach that may be impossible to capture in a single formalization. Nevertheless, the capability approach itself has been immensely useful in the context of studying poverty, gender issues, political freedom, and the standard of living. It has also resulted in the creation of the Human Development Index (HDI), popularized by UNDPs Human Development Reports since 1990. This chapter critically examines the HDI and recent advances in the human development literature.

Deconstructing the Decline in Inequality in Latin America

Inequality in Latin America unambiguously declined in the 2000s. The Gini coefficient fell in 16 of the 17 countries where there are comparable data, and the change was statistically significant for all of them. Existing studies point to two main explanations for the decline in inequality: a reduction in hourly labor income inequality, and more robust and progressive government transfers. Available evidence suggests that it is the skill premium -- or, more precisely, the returns to primary, secondary, and tertiary education vs. no schooling or incomplete primary schooling -- that drives the decline in hourly labor income inequality. The causes behind the decline in returns to schooling, however, have not been unambiguously established. Some studies find that returns fell because of an increase in the supply of workers with more educational attainment; others, because of a shift in demand away from skilled labor.

The decline in inequality in Latin America: How much, since when and why

Between 2000 and 2009, the Gini coefficient declined in 13 of 17 Latin American countries for which comparable data exist. The decline was statistically significant and robust to changes in the time interval, inequality measures and data sources. In depth country studies for Argentina, Brazil, Mexico and Peru suggest that there are two phenomena which underlie this trend: (i) a fall in the premium to skilled labor (as measured by returns to education); and (ii) higher and more progressive government transfers. The fall in the premium to skills results from a combination of supply and demand factors and, in Argentina—and to a lesser extent in Brazil--, from more active labor market policies as well.

Stability and Vulnerability of the Latin American Middle Class

Using panel data-sets from Mexico and Chile for the first years of the 21st century, the authors examine the determinants of middle-class intra-generational mobility. The middle class is defined by means of a latent index of economic well-being that is less sensitive to short-term fluctuation and measurement error than standard measures of income. The authors find high rates of both upward and downward mobility in Mexico and Chile, indicating that the middle class has opportunities to move to higher levels of well-being but is also vulnerable to falling into poverty. In both countries, labour-market resources (education and occupational status of the household head and number of members in the labour market) are much stronger determinants of mobility than demographic factors, suggesting the importance of policies that foster human capital and protect workers from shocks. Rural middle-class households are substantially more vulnerable to falling into poverty and have little chance of advancing to upper classes than their urban counterparts.

Child labor, school attendance, and indigenous households : evidence from Mexico

The authors use panel data for Mexico for 1997 to 1999 to test several assumptions regarding the impact of a conditional cash transfer program on child labor, emphasizing the differential impact on indigenous households. Using data from the conditional cash transfer program in Mexico PROGRESA (OPORTUNIDADES) they investigate the interaction between child labor and indigenous households. While indigenous children had a greater probability of working in 1997, this probability is reversed after treatment in the program. Indigenous children also had lower school attainment compared with Spanish-speaking or bilingual children. After the program, school attainment among indigenous children increased, reducing the gap.

Is the baby to blame ? an inquiry into the consequences of early childbearing

Teenage pregnancy has been a cause of concern for policy makers because it is associated with a complex and often adverse social context for women. It is seen as the cause of lower social and economic achievement for mothers and their children, and as the potential determinant of inter-generational poverty traps. However, the question of whether pregnancy -- and the subsequent rearing of a child -- is actually the trigger of poverty, higher dependence on social welfare and/ or other undesirable social and economic consequences has not been studied in developing countries with enough rigor to establish a causal relation. This paper follows a methodology previously applied in the United States, using Mexican data from the National Survey of Demographic Dynamics, to exploit information about miscarriages as an instrument to identify the long-term consequences of early child bearing. Thus, the paper takes the advantage of a natural experiment: it compares the outcomes of women who became pregnant in adolescence, and gave birth, to outcomes of women who became pregnant in adolescence and miscarried. This approach only allows for estimating the costs of adolescent childbearing for teenagers in a risk group, that is, teenagers who are likely to experience a pregnancy. The results are consistent with findings in the United States, suggesting that, contrary to popular thinking, adolescent childbearing does not hamper significantly the lifelong opportunities of the young mothers. Actually, women who gave birth during their adolescence have on average 0.34 more years of education, and are 21 percentage points more likely to be employed, compared with their counterparts who miscarried. The results also suggest, however, greater dependence on social welfare among women who gave birth during adolescence: their social assistance income is 36 percent higher, and they are more likely to participate in social programs, especially the conditional cash transfer program Oportunidades.

A Long-Term Perspective on Inequality and Human Development in Latin America

Latin America has always been seen as a region with inherently high levels of inequality. After devoting his time and scientific talent to explore the new world in the early nineteenth century, Ale...

SYMPOSIUM ON SPATIAL INEQUALITY IN LATIN AMERICA

Latin America is the region with the highest levels of inequality in theworld. This is the case when we look at inequality in income levels and income-generation capabilities among individuals, using micro-data. Recently, researchhas also looked into regional disparities between and within countries, which hasraised new and important theoretical and empirical questions. Given the importanceof the issue, especially in this region of the world, UNU and WIDER decided tolaunch a call for papers for a meeting to dicuss recent findings aimed at explainingregional disparities in Latin America and the Caribbean. Three papers published inthe previous issue and two in the present issue of