IDEAS home Printed from https://ideas.repec.org/p/got/iaidps/219.html
   My bibliography  Save this paper

Sectorial shifts and Inequality. How to relate macroeconomic events to inequality changes

Author

Abstract

This paper presents a way to explore how macroeconomic shifts cause inequality changes. It is based on the backwardness observed in the agricultural sector in rural areas. It shows why highly dualistic economies tend to be more unequal than economies with flexible and integrated labour markets. Assuming that an inter-sectorial wage gap exists, this methodology allows control over the direct impact on inequality changes caused by macroeconomic changes that affects the relative competitiveness between the tradable and non-tradable sectors. The methodology aims to find the wage gap change (in log units) taking place between two points in time, which is not dependent on the distribution of endowments of the employed population (observed and unobserved characteristics). The decomposition methodology here proposed shows to be consistent under few assumptions (log normal distribution of earnings and inter-sectorial stochastic dominance) and was tested using real and simulated data. The procedure supports the conclusions by Devillanova et al. (2010) suggesting a channel through which trade integration can affect the wage inequality in a context of capital-skill complementarity and imperfect mobility of workers. The main conclusion of this paper is that duality is a source of inequality. Therefore, policies oriented to eliminate the systematic backwardness appear to be highly desirable in such economies.

Suggested Citation

  • Carlos Villalobos Barría, 2012. "Sectorial shifts and Inequality. How to relate macroeconomic events to inequality changes," Ibero America Institute for Econ. Research (IAI) Discussion Papers 219, Ibero-America Institute for Economic Research.
    • Handle: RePEc:got:iaidps:219
    as

    Download full text from publisher

    File URL: http://www2.vwl.wiso.uni-goettingen.de/ibero/working_paper_neu/DB219.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. -, 2007. "Economic growth with equity: challenges for Latin America," Copublicaciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 1935 edited by Eclac.
    2. Alex A. Ruehle & Kishore G. Kulkarni, 2011. "Dutch disease and the Chilean copper boom – an empirical analysis," International Journal of Education Economics and Development, Inderscience Enterprises Ltd, vol. 2(1), pages 61-80.
    3. Agosin, Manuel R., 2007. "Trade and growth: why Asia grows faster than Latin America," Copublicaciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 1940.
    4. Stephan Klasen & Thomas Otter & Carlos Villalobos Barría, 2012. "The dynamics of inequality change in a highly dualistic economy: Honduras, 1991-2007," Ibero America Institute for Econ. Research (IAI) Discussion Papers 215, Ibero-America Institute for Economic Research.
    5. Giovanni Andrea Cornia, 2012. "Inequality Trends and their Determinants: Latin America over 1990-2010," Working Papers - Economics wp2012_02.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    6. Mario Damill & Roberto Frenkel, 2012. "Macroeconomic Policies, Growth, Employment, and Inequality in Latin America," WIDER Working Paper Series wp-2012-023, World Institute for Development Economic Research (UNU-WIDER).
    7. Stephan Klasen & Thomas Otter & Carlos Villalobos Barría, 2012. "The dynamics of inequality change in a highly dualistic economy: Honduras, 1991-2007," Ibero America Institute for Econ. Research (IAI) Discussion Papers 215, Ibero-America Institute for Economic Research.
    8. repec:unu:wpaper:wp2012-23 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Carlos Villalobos Barría & Stephan Klasen & Sebastian Vollmer, 2016. "The Distribution Dynamics of Human Development in Mexico 1990–2010," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(S1), pages 47-67, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cornia, Giovanni Andrea, 2014. "Income inequality in Latin America. Recent decline and prospects for its further reduction," Macroeconomía del Desarrollo 36852, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    2. Ms. Evridiki Tsounta & Anayochukwu Osueke, 2014. "What is Behind Latin America’s Declining Income Inequality?," IMF Working Papers 2014/124, International Monetary Fund.
    3. Alex Cobham, Andy Sumner, 2013. "Is It All About the Tails? The Palma Measure of Income Inequality-Working Paper 343," Working Papers 343, Center for Global Development.
    4. Ricardo FFRENCH-DAVIS, 2012. "Employment and real macroeconomic stability: The regressive role of financial flows in Latin America," International Labour Review, International Labour Organization, vol. 151(1-2), pages 21-41, June.
    5. Ricardo Ffrench-Davis, 2012. "Empleo y estabilidad macroeconómica real: El rol de los flujos financieros en América Latina," Working Papers wp349, University of Chile, Department of Economics.
    6. Ffrench-Davis, Ricardo, 2015. "Neoestructuralismo y macroeconomía para el desarrollo," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 39629, May.
    7. Alex Cobham & Andrew Sumner, 2013. "Is it all about the tails? The Palma measure of income inequality," Working Papers 308, ECINEQ, Society for the Study of Economic Inequality.
    8. Ocampo, José Antonio, 2011. "Macroeconomy for development: countercyclical policies and production sector transformation," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    9. Ffrench-Davis, Ricardo., 2010. "Macroeconomía para el empleo decente en América Latina y el Caribe," ILO Working Papers 994590693402676, International Labour Organization.
    10. Rishav Bista & Brandon J. Sheridan, 2021. "Economic growth takeoffs and the extensive and intensive margins of trade," Review of Development Economics, Wiley Blackwell, vol. 25(3), pages 1373-1396, August.
    11. Seguino, Stephanie & Braunstein, Elissa, 2012. "The impact of economic policy and structural change on gender employment inequality in Latin America, 1990-2010," MPRA Paper 43261, University Library of Munich, Germany.
    12. repec:ilo:ilowps:459069 is not listed on IDEAS
    13. Ricardo Ffrench-Davis, 2008. "From Financieristic To Real Macroeconomics: Seeking Development Convergence In Ees," Working Papers wp272, University of Chile, Department of Economics.
    14. -, 2009. "Foreign Direct Investment in Latin America and the Caribbean 2008," La Inversión Extranjera Directa en América Latina y el Caribe, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 1139 edited by Eclac, May.
    15. Ocampo Jose Antonio, 2010. "Rethinking Global Economic and Social Governance," Journal of Globalization and Development, De Gruyter, vol. 1(1), pages 1-29, January.
    16. Agosin, Manuel R., 2008. "Export diversification and growth in emerging economies," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    17. Gustavo Canavire-Bacarreza & Luis C. Carvajal-Osorio, 2020. "Two Stories of Wage Dynamics in Latin America: Different Policies, Different Outcomes," Journal of Labor Research, Springer, vol. 41(1), pages 128-168, June.
    18. Ebert, Laura & La Menza, Tania, 2015. "Chile, copper and resource revenue: A holistic approach to assessing commodity dependence," Resources Policy, Elsevier, vol. 43(C), pages 101-111.
    19. -, 2010. "Foreign Direct Investment in Latin America and the Caribbean 2009," La Inversión Extranjera Directa en América Latina y el Caribe, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37607 edited by Eclac, May.
    20. Roxana Maurizio, 2015. "Transitions to Formality and Declining Inequality: Argentina and Brazil in the 2000s," Development and Change, International Institute of Social Studies, vol. 46(5), pages 1047-1079, September.
    21. Claudio Bravo-Ortega & Manuel Agosin Trumper, 2007. "The Emergence Of New Successful Export Activities In Latin America: The Case Of Chile," Working Papers wp236, University of Chile, Department of Economics.

    More about this item

    Keywords

    Inequality; Decomposition; Wage-gap; Tradable and Non-tradable sectors; Micro-econometric Simulations;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:got:iaidps:219. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sabine Jaep (email available below). General contact details of provider: https://edirc.repec.org/data/ibgoede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.