Why Have Urban Poverty and Income Inequality Increased So Much? Argentina, 1991–2001

Abstract

Abstract This article analyzes the trends in income inequality and poverty among Argentine households during the nineties. We assess the effect of changes in labor force participation, unemployment, educational levels, and returns to individual characteristics on income inequality and poverty by using a microsimulation approach. We found that unemployment accounts for a large part of the increase in income inequality and poverty experienced in the past decade. Changes in labor force participation had an equalizing effect over the whole period, while changes in the returns to workers’ sociodemographic characteristics could be associated with a small increase in income inequality. With respect to poverty, unemployment affected negatively the proportion of households below the poverty line, amplified the poverty gap, and increased the severity of poverty. In contrast, changes in labor force participation are associated with a reduction in the poverty rate.