On the Determinants of Changes in Wage Inequality in Bolivia

26 Pages Posted: 27 Mar 2015 Last revised: 12 Jul 2019

See all articles by Gustavo J. Canavire-Bacarreza

Gustavo J. Canavire-Bacarreza

Inter-American Development Bank (IDB); IZA Institute of Labor Economics

Fernando Rios‐Avila

Bard College - The Levy Economics Institute

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Date Written: March 15, 2015

Abstract

In recent years, Bolivia has experienced a series of economic and political transformations that have directly affected the labor markets, particularly the salaried urban sector. Real wages have shown strong increases across the distribution, while also presenting a decrease in inequality. Using an intertemporal decomposition approach, we find evidence that changes in demographic and labor market characteristics can explain only a small portion of the observed inequality decline. Instead, the results indicate that the decline in wage inequality was driven by the faster wage growth of usually low-paid jobs, and wage stagnation of jobs that require higher education or are in traditionally highly paid fields. While the evidence shows that the reduction in inequality is significant, we suggest that such an improvement might not be sustainable in the long run, since structural factors associated with productivity, such as workers’ level of education, explain only a small portion of these wage changes.

Keywords: Bolivia, Decomposition, Wage Inequality

JEL Classification: D63, I31, J31

Suggested Citation

Canavire Bacarreza, Gustavo Javier and Rios‐Avila, Fernando, On the Determinants of Changes in Wage Inequality in Bolivia (March 15, 2015). Center for Research in Economics and Finance (CIEF), Working Paper No. 15-08. Available at SSRN: https://ssrn.com/abstract=2585318 or http://dx.doi.org/10.2139/ssrn.2585318

Gustavo Javier Canavire Bacarreza (Contact Author)

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Fernando Rios‐Avila

Bard College - The Levy Economics Institute ( email )

Blithewood
Annandale-on-Hudson, NY 12504-5000
United States

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