The Evolution of Inequality in Latin America in the 21st Century: Patterns, drivers and hypotheses

The paper analyses the evolution of inequality for the largest economies of the Latin American region in the 21st century, separately considering income and wealth. The drivers of change in inequality and possible underlying hypotheses are examined, including the role of the new wave of leftist governments.The evidence revealed that income inequality decreased, although wealth inequality displayed a much less homogeneous pattern. Statistically, the decrease in inequality is associated with labour market changes, and with state redistribution through social expenditure. Wealth inequality is mainly correlated with a change in the share of financial wealth. A possible causal interpretation is that the (new) left threat may have inflated social pressures, mostly in the presence of rents generated by the commodity boom.