Question

1) What explains the fall in inequality from 2002 to 2010 in Latin America? In your answer be sure to explain the reasons for the changes in returns to education.

2) Why did the Latin America experience with industrialization from Word War I until World War II lead Latin American Structuralists to believe that it was necessary to limit imported manufacturing into Latin America?

Answer 1

1) Both poverty and income inequality decreased significantly in Latin America between 2002 to 2010. At the start of the century 25 out of every 100 people in the region we're living on less than $2.50 per day. Today only 14 out of every 100 are in that situation. While some attribute the improvement in distribution to changes in the international economy , others highlight the changes in the public policy.  

The return to education has played a very significant role in the reduction of income inequality. An unprecedented rise in the supply of workers having completed their secondary education has resulted in an enhanced level of wages.

Education and human capital is frequently identified as an important element of growth. Many economists suggest that the long term growth of the Latin America will improve significantly if the learnings in school were to improve.

2)After the war , the Latin American countries were importing all the industry goods that they consumed. Fiscal and financial policies became more orthodox after the war , and this coupled with the disappointing performance of the export sector , made it difficult to escape from the dependence on the industry goods import and primary product export. The difficulties were intensive even before the prices collapsed. While the Latin countries exported the primary goods , they IMPORTED almost all the industry goods that they consumed.

After the world war 2 the Latin American structuralists realized the significance of replacing the foreign imports with domestic production. Latin American structuralism refers to an era of import substitution industrialization in many latin American countries. Efforts were made to create the industries that could utilize the primary products already being produced domestically.