Income inequality in Latin America: Recent decline and prospects for its further reduction

The paper reviews the extent of the income inequality decline that took place in Latin America in 2002-10 and then focuses on the factors that may explain such decline. These include a lowered skill premium following an expansion of secondary education among the poor, and the adoption of more equalizing tax, labour market subsidies and macro policies by a growing number of progressive governments. Finally, the paper reviews the changes in inequality during 2009-12 and discusses whether and how the recent decline can be sustained over the next decade in the context of sluggish world growth.