Data from SEDLAC show that between 1992 and 2002 (the highest point for a comparable data spell) the Gini coefficient for the distribution of household per capita income increased from 0.450 to 0.533.<sup>14</sup> Gasparini and Cruces suggest that during this period the increase in inequality was due the increase in the skills premium: put simply, the wage gap between skilled and low-skilled workers rose. The increase in the skill premium was associated with the modernization of production and organizational structures. This skill-biased technical change, in turn, was associated—to a certain extent—with Argentina’s trade and investment liberalization.

Another factor behind the rise in earnings inequality was the weakening of labor unions. There is evidence that labor union membership and activity diminished significantly from 1991 to 2001. The decline in union activity coincided with reforms such as the privatizations, trade liberalization and price stabilization of the 1990s, which reduced the power of unions through the dissipation of rents from state-owned enterprises, protective tariffs and inflation-induced rents. The decline in union activity during the 1990s, unsurprisingly, coincided with a period of rising wage inequality.

After the 2002 crisis, the Gini coefficient fell from 0.533 in 2002 to 0.442 in 2010.<sup>15</sup> The reduction in inequality accounted for 40 and 50 percent of the decline in extreme and moderate poverty, respectively (Figure 3). During this period, both labor income and non-labor income inequality declined. Gasparini and Cruces argue that the fall in labor income inequality can be accounted for by the expansion of employment generated by the fast economic recovery, the shift in favor of more low-skilled labor-intensive sectors as a result of the devaluation of the Argentine peso, the fading out of the effect of skill-biased technical change in the 1990s, and the rise in the influence of labor unions. All these factors caused the skills premium (measured here by the relative returns to tertiary education) to fall (Figure 6).

This period was characterized by unprecedentedly high per capita GDP growth (of 8 percent per year since 2003 except for the global crisis year of 2009) and a sharp fall in the unemployment rate: from over 20 percent to 8 percent.<sup>16</sup> Although the devaluation initially had a negative impact on real wages, this effect faded as a cheaper peso stimulated output in laborintensive sectors. By the early 2000s, the large-scale technological upgrading was probably coming to an end. Hence, the upward pressure on wages for skilled labor—an unequalizing force—subsided and the skills premium declined. A pro-union and pro-workers government raised minimum wages, mandated lump-sum increases in wages in the private sector and promoted collective bargaining. The revival of union activism coincided with a period of falling wage inequality after 2002.<sup>17</sup> On the other hand, Gasparini and Cruces link the decline in non-labor income inequality to a more progressive fiscal policy. The large devaluation of the peso in 2002 had an indirect equalizing impact in terms of post-fiscal income inequality. The devaluation initially had a negative impact on real wages and a positive effect on rents to land, which was compounded by the substantial improvement in terms of trade resulting from the global commodity boom. However, the initially negative (and unequalizing) effect on real wages was in part compensated by the expansion of progressive export taxes, which were used to finance large anti-poverty programs. Higher fiscal revenues were used to increase social spending. Social spending also became more progressive with the implementation of large cash transfer programs such as _Jefes y Jefas de Hogar Desocupados_ (Unemployed Household Heads program) in 2002 (which reached two million households in 2003). The latter may be an important factor behind the equalizing 4