UNU-WIDER Trading Inequality? Insights from the Two Globalizations in Latin America

Trade flows among countries have increased dramatically during the last globalization episode creating new winners and losers between and within countries. This paper revisits the contested topic of the impact of globalization on within-country inequality in Latin America from a historical perspective. By comparing the two globalization waves (1870–1914, 1970–present) we look at the link between globalization and inequality. Many Latin American countries are still dependent on exporting raw materials, lack an efficient manufacturing sector, and exhibit the highest inequality rates in the world. One hundred years ago, several decades after independence, the region was also highly unequal, specialized in a handful of commodity exports, and had not made the transition to industrialization. The results indicate that the effect of globalization on inequality operates mainly inducing changes in factor endowments while the adoption of labor-saving technologies appears influential in both periods.