New CEPR Paper Casts Doubt on Claims that Latin American "Social Democratic" Governments Have Done Better on Inequality than "Populist" Ones

A new paper from the Center for Economic and Policy Research (CEPR) argues that there is no statistical basis to claim that "social democratic" governments in Latin America have been more effective at reducing inequality than "left-populist" ones. The paper shows that while so-called "left populist" governments did not have a statistically significant effect on inequality when using data from the Socioeconomic Database for Latin America and the Caribbean (SEDLAC), the findings are exactly the opposite when data from the Economic Commission for Latin America and the Caribbean (ECLAC) is used.

"It would be surprising if Latin American governments that have ramped up social spending and significantly reduced poverty had not also made strides in reducing inequality, and of course they have," CEPR Co-Director Mark Weisbrot said. "The findings of scholars who have made such claims are directly contradicted by ECLAC data, and should be taken with a large dose of salt."

The paper, "Decreasing Inequality Under Latin America's 'Social Democratic' and 'Populist' Governments: Is the Difference Real?", by Juan Antonio Montecino, examines economic evidence presented by Darryl McLeod and Nora Lustig that the "social democratic" governments of Brazil, Chile and Uruguay were more successful in reducing inequality than what McLeod and Lustig termed their "left-populist" counterparts of Argentina, Bolivia, Ecuador and Venezuela. The CEPR paper finds that McLeod and Lustig's original results were highly sensitive to which source of data on income inequality is employed, depending on SEDLAC data.

The paper simply replicates the prior study by McLeod and Lustig, using the UN ECLAC data, and gets the opposite result.

ECLAC data, the paper notes, "corrects for income underreporting--when households in an income survey underreport their true amount of income, thus biasing the measurement of inequality", while SEDLAC data does not.

The paper also notes that McLeod and Lustig's determinations of which governments fall under the "left-populist" category, and which under the "social democratic" are arbitrary. "It is not clear that the distinction captures anything more than a general antipathy toward one group of governments and a more positive attitude toward the other group," the paper states.

"The U.S. State Department, under both the Bush administration and the Obama Administration, has been hostile to the so-called 'left-populist' governments," said Weisbrot. He noted that just last month the Obama administration decided to oppose loans by multilateral institutions, such as the World Bank and Inter-American Development Bank, to Argentina.

"But aside from that hostility, it's not clear that the distinction between the two groups of countries is meaningful."