The decline of pay inequality in Argentina and Brazil following the crises and retreat from the neo-liberal model

Abstract

We analyze the distribution of payment in Argentina and Brazil to develop a new insight into trends of economic inequality in the two countries. The use of the between-groups component of Theil’s T statistic, which is decomposable in several different ways, permits us to illuminate the specific winners and losers, by region and by economic activity (sector), as inequality changes. In both countries we find that inequality rose in the neoliberal period, but that it declined following the severe crises of neoliberal policy, in 1998 in Brazil and in late 2001 in Argentina. Economically, this period of post-neoliberalism is characterized in both countries by a decline in the economic weight of the financial sector and a recovery of the position of the civil service. In both countries, the rise in inequality leading to the crisis produced an increase in the relative position of the major metropolitan centers; this positional advantage also declined modestly in the post-crisis recovery period.