Schooling Inequality, Crises, and Financial Liberalization in Latin America

25 Pages Posted: 25 Apr 2009 Last revised: 22 May 2009

See all articles by Nancy Birdsall

Nancy Birdsall

Center for Global Development

Jere Behrman

University of Pennsylvania - Department of Economics

Gunilla Pettersson Gelander

Birk Consulting

Multiple version iconThere are 2 versions of this paper

Date Written: March 21, 2009

Abstract

Latin America is characterized by high and persistent schooling, land, and income inequalities and extreme income concentration. In a highly unequal setting, powerful interests are more likely to dominate politics, pushing for policies that protect privileges rather than foster competition and growth. As a result, changes in policies that political elites resist may be postponed in high-inequality countries to the detriment of overall economic performance.

This paper examines the relationship between structural, high inequality - measured by high levels of schooling inequality - and liberalization of the financial sector for a sample of 37 developing and developed countries for the period 1975 to 2000. Liberalization of the financial sector can be broadly thought of in the Latin American pre-2000 context as opening credit markets that earlier were largely restricted, including by ending directed credit. For our measure of structural inequality we use data on schooling Gini coefficients that have not previously been used in this context. In our sample, we find that increases in financial liberalization were associated with bank crises and other domestic and external shocks, and that higher schooling inequality reduces the impetus for liberalization brought on by bank crises.

Keywords: Latin America, Schooling, structural inequality, financial liberalization

Suggested Citation

Birdsall, Nancy and Behrman, Jere R. and Pettersson Gelander, Gunilla, Schooling Inequality, Crises, and Financial Liberalization in Latin America (March 21, 2009). Available at SSRN: https://ssrn.com/abstract=1392444 or http://dx.doi.org/10.2139/ssrn.1392444

Nancy Birdsall (Contact Author)

Center for Global Development ( email )

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Jere R. Behrman

University of Pennsylvania - Department of Economics ( email )

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Gunilla Pettersson Gelander

Birk Consulting ( email )

Varberg
Sweden

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