DISTRIBUTION AND GROWTH IN LATIN AMERICA IN AN ERA OF STRUCTURAL REFORM

The first section of this paper reviews the most recent evidence on inequality in 18 LatinAmerican countries and shows that in all but four the changes in inequality over the1990s were small and insignificant. The distribution depends on the ownership and rateof return on assets, particularly human capital. In the short run changes in these twovariables tend to be offsetting-growth widens skill-differentials which is regressive, butadvances in education are progressive. The two effects roughly cancel each other outabsent severe macroeconomic shocks or revolutionary changes in the rules of the game.The paper then summarizes various recent papers as well as the author’s recent work onthe impact of structural reforms on inequality. That work shows that the recent reformshave had a negative but small regressive impact on inequality mainly because many ofthe individual reforms had offsetting effects. Trade and tax reform have beenunambiguously regressive, but opening up the capital account is progressive. Finally, thepaper presents evidence of a significant slowdown in the growth rate and argues thatgiven this fact and the insensitivity of the distribution to feasible policy measures, themain problem facing the region at present is not how to improve the distribution butrather how the increase the growth rate.