Abstract
ABSTRACT This paper discusses the role of institutions and structural change in shaping income inequality. It is argued that while social expenditure and direct redistribution are crucial for improving income distribution, sustainable equality requires structural change. The relative importance of these variables in different countries is analyzed and a typology suggested. It is argued that the most equal countries in the world combine strong institutions in favor of redistribution and knowledge-intensive production structures that sustain growth and employment in the long run. Both institutions and the production structure in Latin America fail to foster equality and this explains its extremely high levels of inequality. The paper presents empirical evidence that supports this view, based on a sample of developed and developing countries for the period 1990-2010. Institutions for redistribution are captured through social expenditures as a percentage of GDP, while the role of structural change is captured by indicators of the technological intensity of production and the evolution of labor productivity. The technological intensity of the production structure is proxied through two indicators, the Economic Complexity Index and the ECLAC Index of Technological Intensity.
Highlights
This paper discusses the role of institutions and structural change in income distribution
Institutions for redistribution are captured through social expenditures as a percentage of GDP, while the role of structural change is captured by indicators of the technological intensity of production and the evolution of labor productivity
This paper focuses on two determinants of income distribution, namely the production structure and redistributive institutions
Summary
Resumo: Este artigo discute o papel das instituições e das mudanças estruturais sobre a desigualdade de renda. Instituições que favorecem a distribuição são medidas pelo gasto social como uma porcentagem do PIB, enquanto o papel da estrutura produtiva é medido por indicadores de intensidade tecnológica e pela evolução da produtividade do trabalho. It is argued that while social expenditure and direct redistribution are crucial for improving income distribution, sustainable equality requires structural change. It is argued that the most equal countries in the world combine strong institutions in favor of redistribution and knowledge-intensive production structures that sustain growth and employment in the long run. Both institutions and the production structure in.
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