ABSTRACT
Latin America has the highest level of income inequality in the world. A number of reforming countries have not experienced a rise in inequality; and, on the other hand, the increase in inequality came in a number of countries in the late 1990s, well after the adoption of the reforms. This chapter presents a conceptual framework to approach the analysis of income distribution and of the factors that influence distribution both in the short- and the long-run. It shows that the distribution evidence from the 1990s for 19 countries in the region, and the fourth presents quantitative reform indexes and some econometric evidence on the determinants of inequality. The chapter provides complementary case-study evidence in countries that have experienced sudden changes in inequality or where inequality has remained roughly constant for long periods. On the demand side, economic growth and expansionary macroeconomic policy increase the demand for each factor of production, thus raising their prices.
