Market and Inequality Revisited

The great controversy regarding the results of the application of market-oriented policies on the population's conditions of life, especially about the inequality in the distribution of income, has constituted the concern that has given origin to this paper.

With the objective to test the hypothesis that a free market structure promotes a better income distribution, we have carried out several quantifications of inequality indices in the different structures of the labor market in Bolivia; also, a microsimulation model has been applied, to see whether change toward a market-oriented structure can improve the distribution of income and, lastly, we have carried out an exercise to link income inequality with social mobility.

The reached results, although they are not the sufficiently strong to validate the hypothesis, are sufficiently clear to show us that the free market policies do not act in a negative way on the income distribution.