ABSTRACT
Latin America is known to be the region of the world where income inequality is among the highest. Its high inequality has been invoked by economists as an explanation for its low rates of growth compared to East Asia, for its poor record on education given its per capita income, and for the volatility of its macroeconomic policies-the best-known example being its governments’ periodic recourse to in ationary policies to cope with political demands for greater social justice (Inter-American Development Bank, 1999; Birdsall and Jaspersen, 1997; Sachs, 1989; Dornbusch and Edwards, 1991). High inequality has also been linked to its long history of political instability, authoritarian regimes and civil strife. Historians attribute its high, persistent and region-wide inequality (in virtually all countries of the region) to its unfortunate past-in which colonial victors exploited indigenous labor or imported slaves to enrich themselves via exploitation of the region’s natural resource wealth-its gold, silver, tin, and copper-and its comparative advantage in plantation crops such as sugar (Engerman and Sokolo , 1997). In a typical tale of the curse of natural resources, the result is a high concentration of income of a tiny ruling elite that had no interest in delivering such basic services as education and health to the poor majority, or in creating institutions of government accountable to the great majority of people.
