Income Distribution in the Latin American Southern Cone during the First Globalization Boom and Beyond

Abstract

Latin America is the most unequal region in the world and there is intense debate concerning the explanations and timing of such high levels of income inequality. Latin America was also the region, not including European Offshoots, which experienced the most rapid growth during the first globalization boom. It can, therefore, be taken as an interesting case of study regarding how globalization forces impinged on growth and income distribution in peripheral regions. This article presents a first estimate of income inequality in the Southern Cone of South America (Brazil 1872 and 1920, Chile 1870 and 1920, Uruguay 1920) and some assumptions concerning Argentina (1870 and 1920), and Uruguay (1870). We find an increasing trend towards inequality between 1870 and 1920, which can be explained as a process of inequality both within individual countries and among countries. This trend is discussed along three lines: the relationship between inequality and per capita income levels; the dynamics of the expansion to new areas; and movements of relative factor prices and of the terms of trade. During the current globalization process inequality remained apparently stable, as a result of contradictory movements: within-country inequality increased, especially in the three countries with the highest per capita income; on the other hand, between-country inequality was reduced due to the process of club-convergence among the Southern Cone countries. Divergence with core countries was deepened. Some implicit results seem to show that state-led industrialization was featured by decreasing inequality, both within and among countries.