Macroeconomic Policy, Poverty, and Equality in Latin America and the Caribbean

CEPA Working Paper No.6

Posted: 3 Jun 1998

See all articles by Lance Taylor

Lance Taylor

The New School - Bernard Schwartz Center for Economic Policy Analysis (CEPA)

Enrique Ganuza

United Nations Development Programme (UNDP)

Date Written: March 1998

Abstract

This paper takes up a question frequently raised but rarely addressed empirically - do macroeconomic policy changes and exogenous macro shocks have significant impacts on poverty and income inequality more generally? For 15 countries in Latin America and the Caribbean over the past two decades, the answer is unequivocally "Yes." Specifically, poverty reduction appears to be generally associated with increases in GDP and GDP per capita, reductions in unemployment, reductions in inflation, increases in the minimum wage, reductions in overall inequality, and increases (or at least stability) of the share of social expenditures in GDP. The foregoing relationships are observed over macro "episodes"; (typically bounded by substantial economic disturbances and/or major realignments in policy). Countries and overall time periods examined include Argentina, 1974-96; Bolivia, 1980-96; Brazil, 1985-96; Chile, 1974-96; Colombia, 1978-95; Costa Rica, 1989-96; Cuba, 1989-96; Dominican Republic, 1981-96; Ecuador, 1970-96; Jamaica, 1960-95; Mexico, 1984-94; Nicaragua, 1980-93; Paraguay, 1970-96; Peru, 1985-95; and El Salvador, 1980-96. Within this data set, the authors identify 49 episodes. Poverty incidence is estimated for 45 of them: it stays stable or rises in 26 and decreases in the remaining 19 cases. The sample appears to be large enough to provide insight into distributional processes which operate across nations, or at least developing countries in the Western Hemisphere. The paper concludes with some implications for economic policy.

JEL Classification: O1, E6

Suggested Citation

Taylor, Lance and Ganuza, Enrique, Macroeconomic Policy, Poverty, and Equality in Latin America and the Caribbean (March 1998). CEPA Working Paper No.6, Available at SSRN: https://ssrn.com/abstract=69032

Lance Taylor (Contact Author)

The New School - Bernard Schwartz Center for Economic Policy Analysis (CEPA) ( email )

80 Fifth Ave.
5th Floor
New York, NY 10027
United States

Enrique Ganuza

United Nations Development Programme (UNDP) ( email )

New York, NY 10017
United States

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