Regional inequality in Latin America : does it mirror the European pattern?

The aim of this chapter is to analyse the comparative evolution of regional inequality over the course of the historical economic development processes in four countries of South West Europe - France, Italy, Portugal and Spain - and nine countries of Latin America: Argentina, Bolivia, Brazil, Chile, Colombia, Mexico, Peru, Uruguay and Venezuela. Our analysis, which goes back to the nineteenth century, shows that regional income inequality has followed over time what appears now to be an N-shaped evolution in both regions. However, both experiences differ markedly and we identify the main stylized facts of these trajectories. First, Latin America begun the period with higher levels of regional inequality than Europe. Second, the increase in inequality up to the interwar years was more intense in Latin America than in Europe. Besides, the increasing disparities in Europe in this initial period were based on the high territorial concentration of industry while in Latin America inequality mainly grew responding to the specific geography of the natural resources. Third, both regions underwent a period of convergence between the aftermath of the World War II and the crisis of the 1970s, being the process more intense in the European case. In Europe, the spread of industrialization and structural change to a growing number of regions was determinant in the decrease in inequality. In the case of Latin America, however, it was the marked change in economic policy - import substitution industrialization - that constituted the driving force behind the regional convergence. Finally, the crisis of the 1970s and changes in the international political and economic consensus in the 1980s signalled the beginning of a new stage in the evolution of inequality. A context of increasing international economic integration brought to a halt the narrowing of the gap between richer and poorer regions, but in a lower degree in Europe compared to Latin America. In this case, the liberalism typical of the 1980s, as enshrined in the Washington Consensus, favoured reinsertion into the international goods and factor markets and led to the unequal growth of those regions best endowed with resources.