The surprising reduction of inequality during a commodity boom: what do we learn from Latin America?

Past experience and economic theory lead us to expect a positive relationship between income inequality and commodity booms. Yet Latin America's recent improvement in income distribution coincided with a rapid growth in commodity exports. How was this positive outcome possible? This paper answers this question using a combination of primary and secondary sources. It highlights the role of (re)distributive policies that enlarged the impact of labour market outcomes. The paper concludes that political pressures forced governments to manage the commodity boom better than in the past but did not lead to significant transformations in the region's elite-driven development model.