Economics at your fingertips  

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

Giorgos Gouzoulis and Collin Constantine
Additional contact information
Giorgos Gouzoulis: University College London, Institute for Innovation and Public Purpose
Collin Constantine: Department of Economics, SOAS University of London

No 235, Working Papers from Department of Economics, SOAS, University of London, UK

Abstract: This article offers a historical and econometric study on the determinants of functional income inequality in Chile and Mexico between 1980-2011. This is the first study on the determinants of the labour share in developing economies using single-country analysis that covers the historical period before 1990. We find robust evidence that government consumption is a positive driver of the respective wage shares. Since Chile has experienced persistent cuts in government welfare as opposed to Mexico, fiscal austerity 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. However, globalisation has exposed Mexico’s labour-intensive industries to wage competition and this lowers its wage share. In contrast, Chile’s commodity exports and wage share have benefitted from trade globalisation. These comparative results demonstrate the importance of country-level studies as each country’s historical evolution and varied implementation of neoliberalism can tell unique distributional stories and provide more accurate policy insights for an inclusive growth strategy.

Keywords: Inequality; Labour Share; Chile; Mexico (search for similar items in EconPapers)
JEL-codes: F62 F63 O54 (search for similar items in EconPapers)
Pages: 25
Date: 2020-05
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Working Papers from Department of Economics, SOAS, University of London, UK Contact information at EDIRC.
Bibliographic data for series maintained by Yannis Dafermos ().

Page updated 2020-09-24
Handle: RePEc:soa:wpaper:235