From Trade-Off to Win-Win! Prudent Policy or Coincidental Conditions for Latin American economies

Abstract: Many Latin American economies benefited greatly from increasing international trade and an unprecedented commodity boom in the dawn of the 21 st century. At the same time the region successfully reduced the prevailing income inequality, apparently without compromising economic growth. These events seem to challenge the common belief of economists, who proclaim the mutual exclusiveness of growth promoting measures and inequality reducing policies. They also contrast the trends of rising income disparities in the western world, as famously expressed by Thomas Piketty (2014). Given Latin America’s long and burdensome history of high income inequality, the recent changes are untypical, which made the region a popular subject for research of economic inequality. While, numerous scholars tried to explain the relationship between economic growth and income inequality, this study primarily focuses on the impact of international trade on this very relationship. The contemporary case of Latin America fits this purpose greatly and is above all fascinating due to its historical properties in respect to incom