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International Inequalities Institute at the London School of Economics and Political Science 

Inter-American Development Bank 

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Institute for Fiscal Studies

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Yale University

The first theme concerns establishing the facts about levels and trends of inequality.

Levels and Trends of Inequality: Establishing the facts

The second theme regards inequality of opportunities, analysing the role of the family and community in shaping inequality for the next generation. 

Inequality of Opportunity: Nature and Determinants

The third theme studies how the labour market, concentration of capital and market power affect inequality. 

Inequality and Markets: The Role of Labour, Capital and Goods Markets

The fourth theme considers the role fiscal redistribution plays on inequality fluctuations and efficiency, studying both public revenue and expenditures. 

Taxation and Redistribution: Governments Levelling the Playing Field

The fifth theme assesses the relationship between inequality and political power, establishing links with the four themes previously described. 

Inequality and Political Power: Structures and Struggles

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Theme Three

Inequality and Markets

Trends in inequality have been mostly driven by labor market developments, yet the driving forces of the recent decline in wage inequality are not fully understood. Transitions into and out of informality generate inequality in access to services like healthcare, pensions and unemployment insurance, but we know little about how these are determined and why.
The study of workers&rsquo; informality cannot be disentangled from the study of the distribution of firms. Markups and product market concentration are high in the region. Because business ownership is highly concentrated, rents in the goods markets likely contribute to the concentration of income at the top of the distribution. Firms may also contribute to high levels of income inequality. By reducing wages, firms&rsquo; markdowns in the labor market are a potential source of lower labor share and interpersonal inequality.
The third theme focuses on the relationship between markets (for labor, capital and goods) and inequality. It will first study the extent to which the labour market is a fundamental driver of earnings and income inequality, and then explore the relationship between firm size distribution and competition in different goods markets in order to understand wage dispersion and inequality of capital incomes.

Julián Messina

Richard Blundell

Santiago Levy

Raquel Fernandez

Marcela Eslava

Andrés Velasco

&bull; How are the transitions in and out of informality determined and why they are so frequent?
&bull; How does the truncation of the firm distribution affect market power, and through this channel inequality?
&bull; How unequal is the distribution of firm ownership, and how does that affect interpersonal inequality?

Key questions:

Theme Five

Inequality and Political Power

In many LAC countries, political parties are weak, fragmented, and have shallow roots in society. Even in countries that used to have strong political parties, the electorate is increasingly disenchanted with traditional politicians.
Many countries in the region have experienced a rotation between right and left-wing governments. In line with these unstable political dynamics, governments throughout the region have limited bureaucratic capacity to implement policies and provide high quality public services that could promote equality of opportunities. This issue leaves the bottom- and middle-class vulnerable to economic shocks. In recent years, a wave of political unrest erupted in many LAC countries. While some of the unrest comes from the unmet demands of poorest shares of the population, it is puzzling that most comes from vocal groups in the middle class.
The fifth theme relates to the relationship between inequality and political power, establishing links with the four themes previously described. The network aims to provide an informed discussion of the inequality in political voice across Latin Americans. A second set of issues under this theme concern how the distribution of political power shapes the political economy of decision making.

Ana De La O Torres

Ana María Ibáñez

François Bourguignon

Orazio Attanasio

&bull; How does inequality in political voice relate to (lack of) mobility across generations within the elites? And how is it related to the concentration of wealth and economic power (e.g., obtained from market concentration)?
&bull; How are changes in the political representation of women and minorities affecting inequality?
&bull; What type of inequality generates the social unrest observed in the region?

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Theme Two

Inequality of Opportunity

Family structure and the social norms behind family formation are changing rapidly in the region. Despite rapid demographic and cultural changes, significant gender, ethnic and race gaps remain. While the gender gap has narrowed with the reduction of income inequality, ethnic and race gaps have remained stubbornly high. Communities beyond the nuclear family also play a key role in the establishment of social norms and in shaping opportunities more generally.
The second theme regards inequality of opportunities, analysing the role of the family and community in shaping inequality for the next generation. It will also investigate the determinants of gender, ethnic, race gaps. Finally, we will explore the role of communities and how social norms and culture interact with institutions to generate inequality of opportunities.

Sonya Krutikova

Florencia Torche

Francisco H. G. Ferreira

&bull; Does family formation and matching among individuals accentuate inequality?
&bull; How low is social mobility in Latin America and has it changed in recent decades with the expansion of education?
&bull; How do race, gender, family background and social norms interact to shape the opportunities of future generations?

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Theme One

Levels and Trends of Inequality

Previous analyses have reached contradictory conclusions regarding the levels and trends in inequality. Besides, there is little known about the distribution of wealth, education, healthcare and land in the LAC region, across and within countries, and its determinants.
The first theme concerns examining the facts about levels and trends of inequality, seeking to reconcile previous analyses. We will take a stand on how to interpret conflicting narratives obtained from administrative data, household surveys and national accounts. We will analyse inequality beyond income in a variety of dimensions including wealth, health and education. We will consider inequality of treatment which may lead to inequalities of respect and agency. Constant attention will be paid to horizontal differences by gender, race and ethnicity.

Facundo Alvaredo

Nora Lustig

&bull;Is inequality of income in the LAC region really an outlier in the world?
&bull;How is the COVID-19 pandemic affecting inequality levels?
&bull;Can inequality of treatment and respect be appropriately and consistently measured? How is the COVID-19 pandemic affecting inequality levels?

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Theme Four

Taxation and Redistribution

Pre-fiscal inequality in LAC is among the highest in the world. However, existing analyses suggest that while fiscal policy reduces inequality, this reduction is small relative to the potential in LAC. In some countries, fiscal policy is poverty-increasing.
On the revenue side, a system that is heavily tilted towards consumption taxes and with limited progressivity in income taxes does not redistribute much either. pension systems in LAC are often regressive. Workers who transit between the formal and informal sectors during their careers do not make sufficient contributions to obtain the right to a contributory pension, while paying payroll taxes that are effectively subsidizing the upper middle class and the rich.
The fourth theme will consider the limited role that fiscal redistribution plays in the region to level the playing field. It will consider issues of equity and efficiency on both the revenue and expenditure sides of the government&rsquo;s balance sheet.

&bull;Could Latin American countries do more through fiscal redistribution?
&bull;Which are the efficiency and equity properties of the intertwined tax, expenditure, pension, and health systems in the region?
&bull;Why is low fiscal redistribution a political equilibrium?

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