International Trade and Income Inequality: The Case of Latin American Countries

Figures & data

Figure 1. Gini index of income inequality in Latin America, countries grouped by exports of primary products (average), 1997 to 2020.

Source: Own elaboration. Data for Gini was obtained from World Bank, Development Research Group, available at http://databank.worldbank.org/, accessed on November 14, 2022. Data for EPP at Socio-Economic Database for Latin America and the Caribbean (SEDLAC), Universidad Nacional de la Plata (CEDLAS), and World Bank, available at http://estadisticas.cepal.org/cepalstat/, accessed on November 08, 2022. Group 1: Argentina, Bolivia, Chile, Colombia, Ecuador, El Salvador, Honduras, Paraguay, and Peru. Group 2: Brazil, Costa Rica, Dominican Republic, Mexico, and Panama.

Table 1. Determinants of income inequality in Latin America, 1997 to 2020: Gini index.

Variables	Model 1	Model 2	Model 3	Model 4	Model 5	Model 6	Model 7	Model 8	Model 9
Constant	80.43478 (0.0000) ***	93.95298 (0.0000) ***	89.76195 (0.0000) ***	97.72586 (0.0000) ***	156.8906 (0.0000) ***	148.0444 (0.0000) ***	73.22712 (0.0000) ***	72.86120 (0.0000) ***	80.21635 (0.0000) ***
Trade openness (% GDP)	−0.045699 (0.0023) ***	−0.033807 (0.0046) ***	−0.031256 (0.0066) ***	−0.037277 (0.0016) ***	−0.026718 (0.0219) **	−0.013849 (0.2070)	−0.034069 (0.0074) ***	—	−0.029059 (0.0072) ***
Economic complexity index	—	3.583733 (0.0000) ***	3.595677 (0.0000) ***	3.658223 (0.0000) ***	3.808571 (0.0000) ***	3.937463 (0.0000) ***	—	3.452385 (0.001) ***	2.873508 (0.0024) ***
Net barter terms of trade	—	—	−0.006738 (0.3165)	—	—	—	—	—	−0.009285 (0.2541)
Natural resources rents (% of GDP)	—	—	—	0.091927 (0.1566)	—	—	—	0.016362 (0.8117)	0.054793 (0.4207)
Log GDP per capita	−2.937930 (0.0310) **	−4.407689 (0.0010) ***	−3.889805 (0.0119) **	−4.820971 (0.0002) ***	−10.94418 (0.0000) ***	−10.26265 (0.0000) ***	−2.327172 (0.1084)	−2.669667 (0.0338) **	−1.595451 (0.3290)
Unemployment	—	—	—	—	—	0.209031 (0.0024) ***	—	0.392407 (0.0000) ***	0.277374 (0.9498)
Employment in industry (% of total employment)	—	—	—	—	−0.015794 (0.8590)	—	—	—	0.007330 (0.6100)
Real minimum wage (average annual index)	—	—	—	—	—	—	—	—	−0.012112 (0.0232) **
Average years of education	—	—	—	—	—	—	—	—	−1.581585 (0.0021) ***
WGI: Political stability	—	—	—	—	—	—	−1.040708 (0.0339) **	—	−0.389362 (0.4365)
Financial crisis (dummy = 1)	—	—	—	—	−2.992766 (0.0000)***	−3.099286 (0.0000)***	—	—	—
Model Summary
R-squared	0.839192	0.855340	0.855965	0.856632	0.826908	0.826578	0.843248	0.870163	0.880602
Adjusted R-squared	0.814651	0.832146	0.832162	0.832940	0.814243	0.814431	0.817598	0.848707	0.854886
F-statistic	34.19544	36.87708	35.96117	36.15682	65.28934	68.05174	32.87479	40.55551	34.24270
Prob (F-statistic)	0.000000	0.000000	0.000000	0.000000	0.000000	0.000000	0.000000	0.000000	0.000000
Durbin-Watson stat	0.648118	0.680276	0.686020	0.699622	0.678681	0.670729	0.603665	0.651571	0.769169
Observations	288	276	276	276	265	276	257	276	238
Number of countries	14	14	14	14	14	14	14	14	14

Notes: (1) Significance level at 1% (***), 5% (**), and 10% (*); p-value in parenthesis. (2) All models are estimated using fixed effects. Models 1, 2, 3, 4, 7, 8, and 9 are estimated controlling for cross-section and period fixed effects. Models 5 and 6 are estimated controlling for cross-section fixed effects. All models use the cross-section SUR – panel corrected standard errors (PCSE) to correct for cross-sectional dependence.