# **1. Introduction**

Rising income inequality has recently attracted a great deal of attention in both academic and policy circles. Best-selling books by Piketty (2014) and Stiglitz (2012) have described pronounced increases in inequality in advanced economies, and discussed their myriad social costs. The sustained rise in wage and income inequality in the United States since 1980 has attracted particular attention, with a long and distinguished literature documenting it and debating the relative importance of various contributing factors. Changes in relative skill supplies have been central to the debate, as they can affect the structure of earnings directly through composition effects (Lemieux, 2006) or indirectly through changes in the schooling and experience premiums (Katz and Murphy, 1992; Card and Lemieux, 2001). Changes in technology, subsumed under the rubric of skill-biased technical change, have long been thought to affect the relative demand for skilled and unskilled labor, and hence their relative wages.<sup>1</sup> Others have emphasized the role of changes in labor market institutions, such as the decline in unionization rates and in real minimum wages (e.g., DiNardo, Fortin and Lemieux, 1996). Changes in trading patterns and the effect of rising import competition on domestic wages have also gained prominence (Autor, Dorn and Hanson, 2013). As the vibrant debate on the causes of rising inequality in the United States continues, it seems increasingly unlikely that a single culprit will ultimately be identified.

But inequality can fall, as well as rise. A recent World Bank study has found that income inequality fell (by more than one Gini point) in 39 of 91 countries for which data were available in the 1993-2008 period (World Bank, 2016). Most of these declines were found among emerging and developing countries: inequality fell in 10 African and 11 Latin American countries, for example. Of course, as the World Bank study acknowledges, in many developing countries there are serious concerns about data quality and comparability, which make reliable analysis difficult. Yet, this is not true in all cases and, in those countries where the data are reliable and where the inequality trends are markedly different from those in the United States and Western Europe, it would seem possible to learn much that is of general interest.<sup>2</sup> It is therefore surprising that so little attention has been given in the mainstream

> 1 See, for example, Bound and Johnson (1992), Katz and Autor (1999), Acemoglu (1998 and 2002), and Card and DiNardo (2002) among many others. More recently, changes in the distribution of occupations and, in particular, in the role that different tasks within occupations have on wage determination, have become central to the discussion of technical change (e.g. Autor, Levy and Murnane, 2003).

> 2 This argument is analogous to the suggestion by Hamermesh (2004) that much of general interest could be learned from studying the determinants of labor demand in developing countries: “It is true that in many cases the data on labor markets in developing countries are not as complete as in developed economies, but in some cases they are, and in those instances the availability of good data that cover periods of widespread policy

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