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López-Calva, Luis-Felipe

Poverty Global Practice, The World Bank

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Poverty Global Practice, The World Bank

Last updated: January 31, 2023

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Exiting Belindia? Lesson from the Recent Decline in Income Inequality in Brazil
(World Bank, Washington, DC, 2012) Rocha, Sonia; Lopez-Calva, Luis F.
After decades of persistent disparities, inequality in Brazil has fallen steadily over the last fifteen years. This robust rate of decline has surpassed the pace of the Latin American region as a whole, and is taking place as inequality rises in several rapid-growth emerging economies in other regions. This document examines the recent trend in income inequality in Brazil, its key policy drivers and some of the challenges ahead. It aims at capturing some of the lessons behind Brazil?s experience to share with other economies in the region and beyond.
A Vulnerability Approach to the Definition of the Middle Class
(2011-12-01) Ortiz-Juarez, Eduardo; Lopez-Calva, Luis F.
Measurement of the middle class has recently come to the center of policy debate in middle-income countries as they search for the potential engines of growth and good governance. This debate assumes, first, that there is a meaningful definition of class, and second, that thresholds that define relatively homogeneous groups in terms of pre-determined sociological characteristics can be found empirically. This paper aims at proposing a view of the middle class based on vulnerability to poverty. Following this approach the paper exploits panel data to determine the amount of comparable income -- associated with a low probability of falling into poverty -- which could define the lower bound of the middle class. The paper looks at absolute thresholds, challenging the view that people above the poverty line are actually part of the middle class. The estimated lower threshold is used in cross-section surveys to quantify the size and the evolution of middle classes in Chile, Mexico, and Peru over the past two decades. The first relevant feature relates to the fact that the proposed thresholds lie around the 60th percentile of the distribution. The evidence also shows that the middle class has increased significantly in all three countries, suggesting that a higher number of households face lower probabilities of falling into poverty than they did in the 1990s. There is an important group of people, however, which cannot be defined as middle class from this perspective, but are not eligible for poverty programs according to traditional definitions of poverty.
Is There Such Thing As Middle Class Values? Class Differences, Values and Political Orientations in Latin America
(2011-11-01) Torche, Florencia; Lopez-Calva, Luis F.; Rigolini, Jamele
Middle class values have long been perceived as drivers of social cohesion and growth. This paper investigates the relation between class (measured by position in the income distribution), values, and political orientations using comparable values surveys for six Latin American countries. The analysis finds that both a continuous measure of income and categorical measures of income-based class are robustly associated with values. Both income and class tend to display a similar association to values and political orientations as education, although differences persist in some important dimensions. Overall, there is no strong evidence of any "middle class particularism": values appear to gradually shift with income, and middle class values are between the ones of poorer and richer classes. If any, the only peculiarity of middle class values is moderation. The analysis also finds changes in values across countries to be of much larger magnitude than the ones dictated by income, education, and individual characteristics, suggesting that individual values vary primarily within bounds dictated by each society.
Declining Wages for College-Educated Workers in Mexico: Are Younger or Older Cohorts Hurt the Most?
(World Bank, Washington, DC, 2016-01) Campos-Vazquez, Raymundo M.; Lopez-Calva, Luis F.; Lustig, Nora
Wage inequality has declined in Mexico since 2000. Using data from Mexican labor surveys for the period between 2000 and 2014, this paper investigates whether the decline was driven by wages declining more sharply for younger or older workers. The analysis finds that the wages of older workers declined and the decline was more pronounced in the older cohort. This would seem to support the hypothesis that older workers' skills have become obsolete.
Equity for Sustained Growth: Pernambuco State Equity Assessment
(World Bank, Washington, DC, 2014-06-04) Sharman, Mary Alexander; Lopez-Calva, Luis F.; Rodella, Aude-Sophie
Starting from the aggregate, this report first describes how Pernambuco has fared with respect to the rest of Brazil, both in terms of economic and social welfare performance, over the last decade (2001-2012). In a context of widespread economic growth, Pernambuco has done particularly well in recent years, similar to or above the national average. A key challenge concerns the longer-term, where – notwithstanding the positive performance of recent years-the same level of growth may not be as easily sustained. The solid economic performance has been reflected in an improvement of social indicators, also associated with the governments interiorizacao strategy, a policy developed explicitly to increase the coverage of public services in underserved areas, with a focus on the interior of the state. The decline in poverty rates displays a trajectory towards convergence with Brazil and recently, a faster than national decline of the Gini has brought Pernambucos income inequality below the national and Northeast level.
Income Inequality and Violent Crime : Evidence from Mexico's Drug War
(World Bank, Washington, DC, 2014-06) Enamorado, Ted; López-Calva, Luis-Felipe; Rodriguez Castelan, Carlos; Winkler, Hernán
The relationship between income inequality and crime has attracted the interest of many researchers, but little convincing evidence exists on the causal effect of inequality on crime in developing countries. This paper estimates this effect in a unique context: Mexico's Drug War. The analysis takes advantage of a unique data set containing inequality and crime statistics for more than 2,000 Mexican municipalities covering a period of 20 years. Using an instrumental variable for inequality that tackles problems of reverse causality and omitted variable bias, this paper finds that an increment of one point in the Gini coefficient translates into an increase of more than 10 drug-related homicides per 100,000 inhabitants between 2006 and 2010. There are no significant effects before 2005. The fact that the effect was found during Mexico's Drug War and not before is likely because the cost of crime decreased with the proliferation of gangs (facilitating access to knowledge and logistics, lowering the marginal cost of criminal behavior), which, combined with rising inequality, increased the expected net benefit from criminal acts after 2005.
Deconstructing the Decline in Inequality in Latin America
(World Bank, Washington, D.C, 2013-07) Ortiz-Juarez, Eduardo; Lustig, Nora; Lopez-Calva, Luis F.
Inequality in Latin America unambiguously declined in the 2000s. The Gini coefficient fell in 16 of the 17 countries where there are comparable data, and the change was statistically significant for all of them. Existing studies point to two main explanations for the decline in inequality: a reduction in hourly labor income inequality, and more robust and progressive government transfers. Available evidence suggests that it is the skill premium -- or, more precisely, the returns to primary, secondary, and tertiary education vs. no schooling or incomplete primary schooling -- that drives the decline in hourly labor income inequality. The causes behind the decline in returns to schooling, however, have not been unambiguously established. Some studies find that returns fell because of an increase in the supply of workers with more educational attainment; others, because of a shift in demand away from skilled labor.
Declining Inequality in Latin America in the 2000s : The Cases of Argentina, Brazil, and Mexico
(World Bank, Washington, DC, 2012-10) Ortiz-Juarez, Eduardo; Lustig, Nora; Lopez-Calva, Luis F.
Between 2000 and 2010, the Gini coefficient declined in 13 of 17 Latin American countries. The decline was statistically significant and robust to changes in the time interval, inequality measures, and data sources. In-depth country studies for Argentina, Brazil, and Mexico suggest two main phenomena underlie this trend: a fall in the premium to skilled labor and more progressive government transfers. The fall in the premium to skills resulted from a combination of supply, demand, and institutional factors. Their relative importance depends on the country.
Child Labor, School Attendance, and Indigenous Households: Evidence from Mexico
(World Bank, Washington, DC, 2005-01) Bando, Rosangela G.; Lopez-Calva, Luis F.; Patrinos, Harry Anthony
The authors use panel data for Mexico for 1997 to 1999 to test several assumptions regarding the impact of a conditional cash transfer program on child labor, emphasizing the differential impact on indigenous households. Using data from the conditional cash transfer program in Mexico PROGRESA (OPORTUNIDADES) they investigate the interaction between child labor and indigenous households. While indigenous children had a greater probability of working in 1997, this probability is reversed after treatment in the program. Indigenous children also had lower school attainment compared with Spanish-speaking or bilingual children. After the program, school attainment among indigenous children increased, reducing the gap.
Poverty Convergence in a Time of Stagnation: A Municipal-Level Perspective from Mexico (1992-2014)
(World Bank, Washington, DC, 2019-10) Ortiz-Juarez, Eduardo; Lopez-Calva, Luis F.; Rodriguez-Castelan, Carlos
This paper exploits a novel municipal-level data set to explore patterns of convergence in income and poverty in Mexico during 1992-2014. The paper finds that, despite a context of overall stagnant economic growth and poverty reduction, there is evidence of income and poverty convergence at the municipal level. The findings suggest that these convergence processes stem from a combination of considerable positive performance among the poorest municipalities and stagnant and deteriorating performance among richer municipalities. Re distributive programs, such as federal transfers to poor municipalities and cash transfers to poor households, seem to have played an important role in driving these results by bolstering income growth among the poorest municipalities, while also inducing progressive changes in the distribution of income.