Factor Shares and Resource Booms
Accounting for the Evolution of Venezuelan Inequality
This paper studies the evolution of Venezuelan inequality since 1970. It finds a striking increase in Venezuelan inequality that has been due mainly to the rise in capital's share of GDP. It shows that the increase can be traced back to the coupling of a collapse in the ratio of physical to human capital that occurred from the 1970s with a low elasticity of substitution in production between capital and labour. It also argues that other factors can be identified as having a negative influence on inequality, namely, the policy of repeated devaluations of the currency, trade liberalization and the financial crisis of 1994.