Income Inequality, Poverty, and the Rule of Law: Latin America vs the Rest of the World1

This paper investigates the relationship between the rule of law and income inequality and poverty in twenty Latin American countries using an unbalanced panel over the period 1995 - 2014. These results are then compared to estimates for non-Latin American counties. Using feasible GLS panel methods, we finnd that in many cases, improvements to legal systems reduce inequality and poverty in Latin America while having the opposite effect in the rest of the world. Results are robust to different definitions of inequality and rule of law. Protection of property rights is the most significant rule of law indicator for Latin America economies