Gallo, César; (2001) Economic Reforms and Income Inequality: The Venezuelan Case during the Period 1989-1997. Doctoral thesis (Ph.D), UCL (University College London).

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Abstract

Since Simon Kuznets launched his famous hypothesis in 1955 about the relationship between economic growth and income inequality, a long debate has taken place leading to no definite conclusion about the channels through which economic growth affects the distribution of income. The pattern of growth has been found relevant in establishing the links between economic growth and income inequality by many studies. Therefore, research within individual countries can shed light on the links between economic growth and income inequality. Changes in the Venezuelan economy during the period 1989-1997 provide an interesting case for the analysis of this relationship. On the basis of a micro-data set and applying different static and dynamic decomposition approaches to income inequality, the thesis provides an examination of both the level of inequality and changes in the distribution of income in Venezuela during 1989-1997. It addresses the causes of income inequality, seeks to explain why income inequality changed during that period, and links this with the shifts in the national economy. The author finds that the changes experienced by the Venezuelan economy during 1989-1997 were accompanied by changes not only in the levels of income inequality, but also by shifts in the causes of inequality changes. This suggests that the type of growth may determine not only whether inequality increases or decreases with economic growth, but also the channels through which economic growth affects income distribution. Thus, a growing informal sector and differences between formal and informal employment, along with differences between employers and employees, are found to be the main causes of inequality changes between 1989 and 1997 in the Venezuelan case. Also, social policies are found to be ineffective in improving the distribution of income, due to the over-representation of households headed by informal workers at the lower end of the distribution.

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