What are the solutions to income inequality?
The solutions to income inequality include both internal and external factors. Based on econometrics, the most important internal factors contributing to a decline in income inequality are policy changes, higher education spending, more tax revenue and robust GDP growth. An external factor that contributed was elevated Foreign Direct Investment. Growing exchange rates have also had a small impact on the decline of income inequality. Income inequality rates fell by three-fourths Gini points in the last decade according to International Monetary Fund article “What is Behind Latin America’s Declining Income Inequality.” Researchers cannot specify the exact cause of income inequality decline in Latin America, but they speculate that structural reforms dropped in the ratio of skilled to unskilled workers, and strong economic policies.
Many countries in the region have taken measures to reduce their income inequality mainly including cash transfers and other similar social protection policies. These programs were established with largely public support from the lower and middle class citizens to replace the privatized solutions that were more favored by the upper-class. These laws include re-nationalizing a nation’s pension program like Argentina and Bolivia or expanding the government’s role in social security and educating its populace like with Brazil and Chile (Carnes and Mares 526) (COHA).
Brazil was facing worse inequality in comparison to its latin neighbors with its 0.58 Gini ...
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...ese resources was destined to both investment programs and projects in energy, infrastructure, and transportation, as well as in social sectors. The Economic growth in Ecuador has been inclusive, which has directly reduced poverty and inequality levels and increased the middle class. Between 2006 and 2014, poverty measured by income (using the national poverty line) decreased from 37.6% to 22.5%, while extreme poverty was reduced from 16.9% to 7.7%. Also, the inequality reduction has been quicker than in the region’s average:
The Gini’s coefficient was reduced from 54 to 48.7 between 2006 and June 2014 since growth benefitted more the poorest. Between 2000 and 2011 a more pronounced increase of the income took place in the two poorest quintiles. In fact, the income of the poorest 40% of the population increased to 8.8%, compared with the average 5.8% of the country.
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