The surprising reduction of inequality during a commodity boom: what do we learn from Latin America?

Past experience and economic theory lead us to expect a positive relationship between income inequality and commodity booms. Yet Latin America's recent improvement in income distribution coincided with a rapid growth in commodity exports. How was this positive outcome possible? This paper answers this question using a combination of primary and secondary sources. It highlights the role of (re)distributive policies that enlarged the impact of labour market outcomes. The paper concludes that political pressures forced governments to manage the commodity boom better than in the past but did not lead to significant transformations in the region's elite-driven development model.

Automated summary

This paper discusses the expected positive relationship between income inequality and commodity booms based on past experience and economic theory, but notes that Latin America's recent improvement in income distribution coincided with rapid growth in commodity exports. The role of (re)distributive policies in enlarging the impact of labour market outcomes is highlighted as a key factor in this positive outcome. Despite political pressures forcing governments to manage the commodity boom better, significant transformations in the region's elite-driven development model did not occur.