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Economic Integration, Inequality and Growth:Latin America vs. the European economies in transition

Working Paper Date:
Category: Economic Analysis and Policy
Author: Giovanni Andrea Cornia
Document Symbol: ST/ESA/2011/DWP/101
JEL Classification: D31, E24, E62, F20, F41, I20, O54, P27
Keywords: policy reforms, neo-liberalism, international economic integration, income inequality, Latin America, transition economies of Europe
Working Paper File:

This paper presents a simple theoretical framework to explain variations in income inequality over time and between countries. It also analyses the factors responsible for the widespread rise in inequality during the neo-liberal reforms of 1980-2000 in the fields of trade, foreign direct investment (FDI) and capital flows, and the rises in migration. Finally, it compares the decline in inequality observed in most of Latin America over 2000-2008 with the steady increase of inequality in many European transition economies during this period despite their return to robust growth. The paper argues that such divergence is explained by differences in policies.