Economic Restructuring and Poverty/Income Inequality in Latin America

This study uses an econometric approach to evaluate whether structural reforms in Latin America contributed to poverty and income inequality over the period from 1985 to 2000. Data on structural reforms is employed from the Inter-American Development Bank‟s Structural Policy Index, and poverty and income inequality data is obtained from the World Bank‟s PovcalNet database. Using a panel data analysis with controls for GDP per-capita and political institutions, the overall openness level is found to be significantly positively related to the percent of the population living under the poverty line, the poverty gap, the Gini coefficient, the income ratio of the richest to poorest deciles of the population, and the mean log deviation. Specific reforms that are significantly positively related to poverty and/or inequality include privatizations and financial deregulation. Trade liberalization, average income, and democratic institutions demonstrate a negative, albeit weak, relationship to poverty and inequality