Economic Integration, Inequality and Growth: Latin America Versus the European Economies in Transition

Abstract

The paper first summarizes the theoretical and empirical literature on the growth and income inequality impact of the liberalization of trade, FDI, portfolio flows, and migration over 1980-2000. It then compares the inequality and growth performance recorded in Latin America over 2000-2008 with that recorded in the fast liberalizing European economies in transition during the same period. The paper argues that the latter region recorded growth rates of GDP broadly slightly higher than those of Latin America, but experienced greater growth instability and a rise in income inequality. The paper suggests that such divergent performance is explained by differences in policies