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<p>This study examines the relationship between income inequality and the democratic and technical dimensions of governance in 22 Latin American countries from 1996 to 2023. Using a dynamic panel model with system GMM estimators and dynamic threshold models, we reevaluate the conventional view that higher governance quality uniformly reduces inequality and examine the existence of an institutional Kuznets curve. The results reveal a nonlinear and threshold-dependent relationship, where improvements in governance quality increase income inequality, but this effect diminishes significantly once a critical threshold is surpassed. At a disaggregated level, <i>Political Stability</i>, <i>Rule of law</i> and <i>Regulatory quality</i> are significantly associated with inequality. These findings suggest that governance reforms in Latin America should prioritize reducing the risk of unconstitutional regime change, improving regulatory frameworks to foster competitive markets, and strengthening judicial independence, to ensure equal access to justice. Such reforms could lead to stronger institutions and promote more inclusive and equitable social outcomes.</p>

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Governance and inequality in Latin America: is there evidence of an institutional Kuznets curve?

  • 期刊论文

  • 发表日期：

    2025年12月23日

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  • Fernando Martin-Mayoral,
  • María Gabriela Peñaherrera Plúa

摘要

This study examines the relationship between income inequality and the democratic and technical dimensions of governance in 22 Latin American countries from 1996 to 2023. Using a dynamic panel model with system GMM estimators and dynamic threshold models, we reevaluate the conventional view that higher governance quality uniformly reduces inequality and examine the existence of an institutional Kuznets curve. The results reveal a nonlinear and threshold-dependent relationship, where improvements in governance quality increase income inequality, but this effect diminishes significantly once a critical threshold is surpassed. At a disaggregated level, Political Stability, Rule of law and Regulatory quality are significantly associated with inequality. These findings suggest that governance reforms in Latin America should prioritize reducing the risk of unconstitutional regime change, improving regulatory frameworks to foster competitive markets, and strengthening judicial independence, to ensure equal access to justice. Such reforms could lead to stronger institutions and promote more inclusive and equitable social outcomes.