Structural Change and Income Inequality: evidence from Latin America’s Sectoral Composition (1950 – 2012)

Sammanfattning: Latin America is and has been one of the most unequal regions in the World. Since the end of the Second World War, income inequality has been influenced by the high dependency on exports of agricultural products and raw materials, an early deindustrialization and the rise of low productivity service sectors. In this regard, this study aims to understand the impact of this structural change on income inequality and what were the determinants of the activity of those sectors, with a focus on political economic decisions. This has been done for nine Latin American countries, from the year 1950 until 2012. Firstly, regarding the impact of sectoral composition on income inequality, it was found that expansions of construction, manufacturing and mining where associated with lower concentration. On the other hand, the impact of service sectors was mixed. The second part found that the manufacturing sector was negatively affected by trade liberalization and FDI, while service sectors increased with the second. Mining and Construction could develop under political and macroeconomic volatile periods. Finally, one can claim that Government Services could have risen as a way of protecting internal markets from the effects of higher openness to international markets and its shocks.