SELECCIÓN DE DIRECCIÓN DE APERTURA DEL MOLDE

The division of the population is based on characteristics of the household heads that are relevant for policy discussion and an analysis of factors that can be affected by economic growth. Thus, I divided the population according to the following characteristics:

Age

A s well as providing the possibility of testing the life-cycle theories, already discussed in Chapter 2, the decomposition by age is appealing since, as shown in Chapter 6, there has been a maturing process of the Venezuelan population with its consequent effect on the age structure of the labour force which may lead to changes in relative wage rates and in relative wage growth which, depending on the type of economic growth, would have distributional implications^.

Gender

Recessions have pushed female participation in the labour force up, this being one of the main features observed in the recent evolution of the labour force in Venezuela. This feature might have direct distributional implications through changing the women’s income relative to m en’s. This might be an equalising (progressive) effect if the consequence is a rise in this relative income, and which seems quite likely since it has been observed that the level of education of female employees has risen more rapidly than that of male employees, and that schooling has been shown as being of a high relevance in explaining the level of income. This is addressed in chapters 6 and 7.

Family Type

The rise in female labour force participation might have an equalising effect among couple households, since the increasing participation of women in the labour force has occurred mainly among poorer households (Chapter 6). However, it may have a disequalising (regressive) impact on overall inequality if the result of this higher participation of women in the labour market leads to an increase between the mean income of couple households and the mean income of single households (headed by a single person).

^ The type o f econom ic growth determines the substitution possibilities between younger workers, older workers and capital.

Also, family planning leading to lower fertility may result in both a decline in household size and an increase in the share of households with no children in the total population. Since larger households are more likely to be found in the poorer groups of the population, the former would be a progressive impact among households with children, it rising their income per capita.

Education

Many studies from many different countries confirm a strong relationship between inequality in the distribution of education and inequality in income distribution (Chapter 7). Therefore, this variable must be included in any study that searches for causes of income inequality levels. Equalising changes in the distribution of education may have a progressive impact on income distribution.

Labour force situation

Changes in the type of economic growth induce changes in the employment stmcture, through both changes in the relative importance of economic sectors (government and private) and changes in the economic structure, such as the rising importance of the service sector. The latter may have an inequalising impact on the distribution of income, given the increasing importance of the financial sector offering higher levels of earnings, but sharing lower proportions of total employment which would increase not only inequality among non-manual workers, but also between manual and non- manual workers.

Along with changes in the type of economic growth, the economic cycles have distributional impacts through changes in the unemployment rate and the level of informal employment. The former may have a disequalising impact, increasing the disparity in mean income between worker-headed and non-worker-headed households, while the effect of the latter is not clear since informal employment is found "evenly" distributed across the population (see Chapter 7).

Thus, all those possibilities are analysed by dividing the population by labour force status (employed, unemployed, and inactive), enterprise size, worker category (government, private, and self-employed), type of employment (formal and informal), occupation category (manual and non-manual), and economic activity.

Region

The regional location of economic and political activities implies differences in levels of economic development between regions, which in turn implies differences in levels of employment and social benefits, yielding differences in living standards between geographical regions. One type of economic growth may differ from another in the type of economic activities on which economic growth relies. Therefore, changes in the type of economic growth along with the economic cycles induce changes in the degree of development of the different economic activities, which in turn may induce changes in income inequality between geographical regions.

Income source

Household incomes come from different sources, and these sources are differently distributed throughout the population. Labour earnings is the most important income source of Venezuelan households (see Chapters 6 and 7). Therefore, wage inequality might account for a large proportion of overall inequality. However, changes in other sources of income, such as property rents and interests which are received by a reduced number of households, might also have important influences in overall inequality. For example, the sale of equities to the public during the privatization process of some state enterprises during the 1990s may have increased the importance of assets as a source of income for some households, thereby having a regressive effect on overall inequality in Venezuela. Likewise, holding assets is used as protection against the effects of high inflation having a further disequalising effect. But the other side of the coin is that households having a relatively large amount of income from investments may see their living standard deteriorated during recessions.

Unfortunately, due to data limitations that I explain in the next section, these effects cannot be analysed during the period 1989-1997. However, using the information on income source provided by the data since 1994, I was able to identify which households receive income from which source, although not the amount received, and thus to analyse the distribution of households according to their income source across the population in 1997 (Chapter 7).

10