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Income growth in Latin America has stopped being pro-poor during the slowdown

Oscar Calvo-González's picture
Also available in: Español | Portuguese

The team behind the World Bank’s LAC Equity Lab is starting this new blog series to showcase our favorite charts and visuals that help tell the story of recent developments in poverty and equity in Latin America and the Caribbean. We welcome your comments and ideas, and invite you to explore our LAC Equity Lab and World Bank Poverty websites to learn more.
 
In this first installment, we are tackling a pressing issue for the region – income growth and its implications on inequality.
 
Income growth in Latin America has stopped being pro-poor during the slowdown
 

Source: SEDLAC (World Bank and CEDLAS). Note: growth incidence curves (GIC) show the annualized growth rate of income for every percentile of the income distribution and are calculated using pooled harmonized data from 17 countries. In order to analyze the same set of countries every year, interpolation was applied when country data were not available for a given year.

We know that the economic slowdown affected every region of the world. And Latin America was no exception. But what this chart shows is how this has translated into slower income growth since 2010 for poorer Latin Americans. Even though poorer families are still seeing their income growing, it is not growing as fast as it used to. Between 2003 and 2008, the income growth of the poorest was more than twice that of the richest. But from 2010 to 2013, the income growth across all income levels has been fairly steady at about four percent, an almost 50 percent drop for the poorest.
 
So what does this mean? This flat growth rate across all income levels could mean that the gains that the region achieved in reducing inequality could be put on hold. In a recent report, we show that income inequality has stagnated after the economic slowdown. During the first part of the 2000s, buoyed by higher income growth for the poorest, inequality levels came down considerably. However, since the start of the economic slowdown, the poor are no longer closing the income gap.
 
Questions? Comments? Submit them below.
 

Comments

Submitted by German Caruso on

First of all, great initiative, congratulations for the Team!

It is really nice that you can make the point that economic crises have stronger negative effects for the bottom of the distribution and almost no effects for the top. In order to understand if after all these years of economic growth we are in a better shape than in the past to deal with slowdowns, I was wondering how the figure on the right looks like for a former crisis (for example for the Tequila during the 90s). Have we learn to deal with crisis in LAC? Are safety nets playing a more relevant role these days than the one that they had in the past? Making similar figures for the 90s probably will let us know a bit more about this.

Again, very interesting. Congratulations!

Best,
German Caruso

Submitted by Zizou on

Good very good chart. Plus it shows the income growth of the rich increased by point six percentage points? I think inequality has not been stagnant, its worsening

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