Market Conditioning, Redistribution and Income Inequality in Latin America and the Caribbean
37 Pages Posted: 3 Aug 2011
Date Written: August 2, 2011
This article analyzes Latin American and Caribbean income inequality, making three important contributions. First, we show that politics not only shapes redistribution, but also affects inequality produced by the market, with much of the effect occurring through the market conditioning mechanism. Second, multiple facets of politics impact inequality, including partisan power, social spending, and regime type. Third, politics shapes how economic conditions influence inequality. Specifically, economic growth is equity-enhancing where social spending is high, but equity-reducing where such spending is low. We reach these conclusions based on a time series cross sectional analysis of nearly 200 country-years from 19 Latin American and Caribbean countries.
Keywords: Income inequality, redistribution, political economy, public policy, Latin America
JEL Classification: D31, H51, H52, H53, O54
Suggested Citation: Suggested Citation