A Community Divided: Top Incomes in CARICOM Member States

Abstract

Using a newly created dataset, this article documents the trends in top income shares for CARICOM member states during the 1960–2015 period. Belize, Suriname, Guyana, Jamaica and Haiti are high-inequality countries as compared to Trinidad & Tobago, The Bahamas, Barbados and St. Lucia. Barbados is the only low-inequality country that is converging to its high-inequality peers, while Belize experiences the greatest decline in top income share. The article argues that differential European settlement and land size are colonial origins explaining why member states are divided into high- and low-inequality groups. However, the article demonstrates the importance of policy for distributional outcomes—like the role of Offshore Financial Centres in the case of Barbados. The paper also shows how structural adjustment policies and natural disasters can account for the volatility observed in top incomes. Finally, the article proposes that the lack of inequality-reducing structural change is an important explanation for the enormous holding power of top incomes across the community.

Resume

À l’aide d’un nouvel ensemble de données, cet article documente les tendances dans les revenus les plus élevés des États membres de la Communauté caribéenne (CARICOM en abrégé) au cours de la période 1960-2015. Belize, le Suriname, le Guyana, la Jamaïque et Haïti sont des pays caractérisés par de fortes inégalités par rapport à Trinité-et-Tobago, aux Bahamas, à la Barbade et à Sainte-Lucie. La Barbade est le seul pays à faible inégalité qui converge vers ses homologues à forte inégalité, tandis que Belize connaît la plus forte baisse des revenus les plus élevés. L’article affirme que la colonisation européenne différenciée et la taille des terres sont les origines coloniales qui expliquent la division des États membres en groupes à faibles inégalités et à inégalités élevées. Cependant, l’article démontre l’importance de la politique pour les répercussions distributionnelles, à l’instar du rôle joué par les centres financiers offshore dans le cas de la Barbade. Le document montre également comment les politiques d’ajustement structurel et les catastrophes naturelles peuvent expliquer la volatilité observée parmi les revenus les plus élevés. Enfin, l’article suggère que l’absence de changement structurel réduisant les inégalités est une explication importante de l’énorme puissance de maintien des revenus les plus élevés de la communauté.

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Fig. 1

Source: Author’s illustration using GCIP’s dataset

Fig. 2

Source: Author’s illustration using GCIP’s dataset

Fig. 3

Source: Author’s illustration using GCIP’s dataset

Notes

  1. 1.

    The Caribbean Community (CARICOM) is an organization of 15 Caribbean nations and dependencies whose main objective is to promote economic integration and cooperation among its members.

  2. 2.

    The limitations of PPP are well known. Standard critiques include the practical difficulty of measuring the true purchasing power of a currency and that PPP only holds in the long run; see Taylor and Taylor (2004) for a discussion.

  3. 3.

    See Khemraj (2015) for how high drainage and irrigation costs prevented former slaves from commercialising their landholdings in British Guiana.

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Correspondence to Collin Constantine.

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I am grateful to Wendy Olsen, participants at the 18th Sir Arthur Lewis Institute of Social & Economic Studies Annual Conference and two anonymous referees for useful comments.

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Constantine, C. A Community Divided: Top Incomes in CARICOM Member States. Eur J Dev Res 32, 738–758 (2020). https://doi.org/10.1057/s41287-019-00237-z

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Keywords

  • CARICOM
  • Top income share
  • inequality

JEL Classification

  • D30
  • D63
  • F63
  • N36
  • O54
  • O57