Racial Inequalities in Latin America

Unveiling the Cosmic Race: Racial Inequalities in Latin America

In this paper, Guillermo Woo-Mora uses skin tone and income information for over a hundred thousand individuals across 31 Latin American countries to study racial inequalities during the last decade. First, the author estimates the welfare consequences of racial inequality. Subnational regions with higher income inequality between racial groups have worse economic development. Next, he provides evidence of a skin tone income premium. In an eleven-color palette, each darker shade in skin tone on average leads to a 3% decrease in income, with heterogeneity across countries. The findings suggest that racial discrimination is the main mechanism behind this income premium.

Key Findings

• Broad ethno-racial categories do not consider within racial diversity. Measures of racial phenotypes, as skin tone, are useful to disentangle racial disparities. (Figure 1);
• Income inequalities between racial groups -measured by skin tone- correlate with lower economic development at the subnational level. (Figure 2);
• There is a skin tone premium in Latin America: individuals with whiter skin tones are better off than those with darker skin shades. (Figure 3).

Figure: Income premium relative to skin tone

This figure shows the negative income premium for each PERLA color relative to the whitest skin tone. Thus, the coefficients represent the mean percent difference in income between each skin shade and the whitest skin color –after accounting for demographic variables, intra-municipal fixed effects, and unobserved spatial heterogeneity. For instance, PERLA skin tone four has on average 10 percent less income than the whitest skin tone, while PERLA skin tone ten has 20 percent less income than whitest skin shade.

Policy recommendations

Broad ethno-racial categories veil racial inequalities. Contextual and local measures of racialization are essential to gauge racial disparities. Moreover, besides notions of justice and reparations, racial disparities hinder aggregate economic development. Results suggest that progressive taxation in income and wealth is also progressive in racial terms.

Contacts

• Author

Guillermo Woo-Mora (Paris School of Economics): guillermo.woo-mora@psemail.eu

• Media Inquiries

Olivia Ronsain: olivia.ronsain@psemail.eu; +33 7 63 91 81 68

Acknowledgments

The author is especially grateful to Suanna Oh, Thierry Verdier, Thomas Piketty, Ignacio Flores, Ekaterina Zhuravskaya, Hillel Rapoport, Evan Rose, Eva Arceo-Gómez, Raymundo Campos-Vázquez, David Margolis, and Denis Cogneau. I also want to thank Mauricio Tenorio-Trillo, Sandra Ley, Edward Telles, Javier Castillo, Alice Krozer, María Montoya-Aguirre, Luis Baldomero-Quintana, Anna Barbeta Margarit, Julius Goedde, and Arely García. Thanks to all and participants at the Second World Inequality Conference, Casual Friday Development Seminar and Petit Seminaire Informel at PSE, and DEMOSAL Conference at El Colegio de México for their helpful comments. All remaining errors are my own.