The Political Economy of Inequality in Chile and Mexico: Two Tales of Neoliberalism

Abstract

This paper undertakes a comparative study on the topographies of neoliberalism in Latin America (Chile and Mexico) and provides empirical estimates of how the varied geographies of neoliberalism affect functional income inequality between 1980-2011. Our empirical strategy employs a single-equation Unrestricted Error-Correction Model that tests an exploratory baseline specification. We find robust evidence that government consumption is a positive driver of the respective wage shares. Since Chile has entrenched austerity as opposed to Mexico, it is a fundamental explanation for its falling wage share. Private debt is the second most important explanation for why wage shares have fallen in Chile. We find no evidence of this channel in the Mexican case. The article also finds similarly varied effects of globalisation on the respective wage shares. These results demonstrate the importance of country-level studies and how new spatialities of neoliberalism through different state reconfigurations can tell unique distributional stories.

Global political legitimacy and the structural power of capital

“…For instance, a number of empirical studies suggest that increasing dependence on globally mobile capital is a crucial explanatory factor behind declining unionization and hence the reduced collective bargaining power of the working people (Slaughter, 2007; Kollmeyer & Peters, 2019, p. 15). The result of competitive global pressure and declining bargaining power of labor is often observed in the decreasing shares of wages in GDPs (Gouzoulis & Constantine, 2020). Given the fact that these trends are partly cross‐national, reduced state capacity in economic policy‐making also transforms the terms of interaction between transnational capital and the global working class.…”