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Earnings mobility, inequality, and economic growth in Argentina, Mexico, and Venezuela

Abstract

This paper examines changes in individual earnings during positive and negative growth periods in three Latin American economies: Argentina, Mexico, and Venezuela. We ask two major questions. First, do panel income changes favor the income recipients who started at the top of the income distribution (“divergent mobility”) or those who started at the bottom (“convergent mobility”)? And second, are the groups that are found to gain the most when the economy is growing those that are found to lose the most when the economy is contracting (“symmetry of mobility”) or is the pattern asymmetric in the sense that the same groups do best both in times of economic growth and in times of economic decline? We find support for the divergent mobility hypothesis only in scattered years in the cases of Mexico and Venezuela and no support at all in the case of Argentina. Rather, earnings mobility is most frequently convergent or neutral in all three countries. As for the symmetry of mobility hypothesis, we find that it is rejected in nearly all cases; rather, those groups that gain the most when the economy is growing are also the ones that gain the most or lose the least when the economy is contracting. Furthermore, we discuss how the absence of divergence reconciles with rising inequality in the countries under study.

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Acknowledgments

We would like to acknowledge the valuable comments of two anonymous referees and the Editor of this journal. Also, we would like to thank Yang Song and David Jaume for excellent research assistance.

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Correspondence to Gary S. Fields.

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Fields, G.S., Duval-Hernández, R., Freije, S. et al. Earnings mobility, inequality, and economic growth in Argentina, Mexico, and Venezuela. J Econ Inequal 13, 103–128 (2015). https://doi.org/10.1007/s10888-014-9285-8

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Keywords

  • Earnings mobility
  • Income convergence
  • Latin America