Inequality, Economic Growth and Structural Change: Theoretical Links and Evidence from Latin American Countries

Produced by: 
Pontificia Universidad Católica del Perú
Available from: 
June 2015
Paper author(s): 
Mario D. Tello
Topic: 
Macroeconomics - Economic growth - Monetary Policy
Poverty - Inequality - Aid Effectiveness
Year: 
2015

This paper summarizes the theoretical literature of the connections between inequality, economic growth and structural change and presents evidence of these connections for a sample of twelve Latin American countries in period 1980-2011. This suggests that the low degree of structural change has caused a statistical impact on inequality and economic growth in only four and one countries respectively. Consequently, this result rejects the conjecture that structural change has been growth reducing in Latin America. The absence of a statistical causal relationship from structural change to economic growth may be because sectoral labor reallocation does not take into account informal activities. On the other hand, coverage of the causal effects of growth and/or inequality on structural change has been greater than the respective effects of structural change on inequality and/or economic growth. Seven Latin American countries experienced those causal effects.

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