The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.
Between 2003 and 2010, Latin America experienced a solid record of economic growth, coupled with a notable reduction in income inequality. The regional Gini coefficient fell from 0.556 to 0.521 and declined in all 15 out of 17 countries in which frequent data are available. However, previous studies have warned about problems in the sustainability of the decline in income inequality and this study presents evidence of stagnation on this front between 2010 and 2013. The results are robust to various measures of income inequality, but differ across the region. While largely attributable to the recovery from the global financial crisis in Mexico and some countries in Central America, the results are also supported by the demonstrated slowdown in inequality reduction in other countries, including Brazil, Ecuador and Bolivia.
In this article, we introduce the community-contributed command randcoef, which fits the correlated random-effects and correlated random-coefficient models discussed in Suri (2011, Econometrica 79: 159–209). While this approach has been around for a decade, its use has been limited by the computationally intensive nature of the estimation procedure that relies on the optimal minimum distance estimator. randcoef can accommodate up to five rounds of panel data and offers several options, including alternative weight matrices for estimation and inclusion of additional endogenous regressors. We also present postestimation analysis using sample data to facilitate understanding and interpretation of results.
The 2001-02 Argentine crisis had a profound impact on Uruguay's economy. Uruguay's gross domestic product shrank by 17.5 percent, and the proportion of people living below the poverty line doubled in only two years. It took almost 10 years for the poverty rate to recover to its precrisis level. This paper uses a macro-micro simulation technique to simulate the impact of a similar crisis on the current Uruguayan economy. The simulation exercise suggests that Uruguay would now be in a better place to weather such a severe crisis. The impact on poverty would be considerably more moderate; inequality would not change significantly; and household incomes would be 8 percent lower than in the absence of a crisis (almost 9 percent lower among households in the bottom 40 percent of the income distribution). The paper also explores the changes in social welfare policy that took place in the last decade that are protecting vulnerable groups from new macroeconomic shocks. We find that, despite the new policies, young individuals, woman-headed households, residents of Montevideo, and people who have not completed secondary education are more vulnerable to falling into poverty were the crisis to strike.JEL classification: E32, E37, F6, I3, O54
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