Latin America: Rich and Poor
Just how bad is income inequality in Latin America — and what explains its persistence of many decades?
November 21, 2002
The development community has long been concerned with the level — and the persistence — of income inequality in Latin America. Only Africa rivals that region when it comes to having a few people who are very, very rich — and a lot of people who are very, very poor.
|Income Inequality (% of National Income)|
There are a number of ways to measure income inequality. One that is simple — and yet meaningful — is to divide total national income into the portions received by the richest and poorest people in the country.
If the income distribution were perfectly equal, the richest 10% in a country would receive just 10% of the national income. And the poorest 20% would receive 20% of the national income.
No country comes even close to this perfection. For example, the richest tenth of Mexicans command 42% of national income, while the 20% of Mexicans who are at the bottom of the income totem pole get just 3.5% of national income.
In Brazil, meanwhile, inequality is even more pronounced: The richest tenth get 48% of national income, while the fifth account for only 2% of national income.
By comparison, in the United States the top tenth of income earners receive “just” 31% of total income, while the bottom fifth receive 5% of total income.
And in Sweden, the top tenth account for 20% of all national income — while the poorest fifth of Swedes receive almost one-tenth of the total.
To make matters worse, the gap between rich and poor Latin Americans has not narrowed down. In 1963, the income share of the poorest 30% Mexicans was around 3-4%. And the richest 10% earned between 42 and 49% total income.
Back then, the top 10% of Brazilians were in a similarly favored situation, commanding between 41% and 50% of all income. Indeed, in the 1970s the share of the rich may have gone up temporarily to nearly 60%.
For all the talk about the need for greater economic justice, the inequality rankings of countries are highly stable over the past 40 years or so.
Sweden had one of the most equal income distributions 40 years ago — and still has a relatively equal income distribution today.
And countries like Mexico and Brazil remain among the countries with very high levels of income inequality — just as they were in the early 1960s.
Founder and CEO, Global Business School Network Guy Pfeffermann is the Founder and CEO of the Global Business School Network. He was the Director of the Economics Department and Chief Economist for the International Finance Corporation from 1988-2003. Since 2003, he has served as the Director of the Global Business School Network of International Finance […]