Determinants of inequality in the Andean Community: evidence from a Bayesian panel VAR

Nicole Cáceres and Dante Urbina
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Nicole Cáceres: Universidad de Lima
Dante Urbina: Universidad de Lima

Lecturas de Economía, 2023, issue 99, 209-243

Abstract: This article analyzes the determinants of income inequality in the countries of Andean Community considering the effects of foreign direct investment, human capital, unemployment, and production by means of a Bayesian panel VAR model. It is found that: i) foreign direct investment has a negative effect on income inequality in Bolivia, which is consistent with the neoclassical theory of international trade, and a positive one in Peru, which is the country with the most mining in the sample; ii) the response of inequality to shocks in human capital is positive in almost all cases, which could imply that education amplifies the existing gap; iii) the impact of unemployment on inequality is positive in Colombia, the country with the lowest level of informality, negative in Peru and not significant in Bolivia and Ecuador, where the loss of formal jobs does not necessarily affect income because there is the alternative of informal employment; iv) the effect of production on inequality is positive in Bolivia and Colombia, but negative in Ecuador and Peru.

Keywords: Income distribution; human development; human resources; foreign direct investment (search for similar items in EconPapers)
JEL-codes: E25 O15 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:lde:journl:y:2023:i:99:p:209-243

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DOI: 10.17533/udea.le.n99a352399

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