Productivity, social expenditure and income distribution in Latin America

Vol. 37 No. 4 (2017)

Oct-Dec / 2017
Published February 26, 2020
PDF-English
PDF-English

How to Cite

Cimoli, Mario, Gabriel Porcile, Antonio Martins Neto, and Fernando Sossdorf. 2017. “Productivity, Social Expenditure and Income Distribution in Latin America”. Brazilian Journal of Political Economy 37 (4):660-79. https://doi.org/10.1590/0101-31572017v37n04a01.

Productivity, social expenditure and income distribution in Latin America

Mario Cimoli
DPPM, Economic Commission for Latin America and the Caribbean (ECLAC) and University of Venice
Gabriel Porcile
DPPM, ECLAC and Federal University of Parana,
Antonio Martins Neto
DPPM, ECLAC,
Fernando Sossdorf
DPPM, ECLAC
Brazilian Journal of Political Economy, Vol. 37 No. 4 (2017), Oct-Dec / 2017, Pages 660-679

Abstract

This paper discusses the role of institutions and structural change in shaping income inequality. It is argued that while social expenditure and direct redistribution are crucial for improving income distribution, sustainable equality requires structural change. The relative importance of these variables in different countries is analyzed and a typology suggested. It is argued that the most equal countries in the world combine strong institutions in favor of redistribution and knowledge-intensive production structures that sustain growth and employment in the long run. Both institutions and the production structure in Latin America fail to foster equality and this explains its extremely high levels of inequality. The paper presents empirical evidence that supports this view, based on a sample of developed and developing countries for the period 1990-2010. Institutions for redistribution are captured through social expenditures as a percentage of GDP, while the role of structural change is captured by indicators of the technological intensity of production and the evolution of labor productivity. The technological intensity of the production structure is proxied through two indicators, the Economic Complexity Index and the ECLAC Index of Technological Intensity.

JEL Classification: D30; H52; O33; O54.


Keywords: Income distribution estrutural change social expenditure.