Are dictatorships more unequal? : economic growth and wage inequality during Portugal's estado novo, 1944-1974

Abstract

This paper relates the changes in the structure of the Portuguese economy to changes in wage inequality, during 1944-1974, when Portugal had its golden age of growth under a dictatorial regime. We present a new wage data set based on surveys conducted by the Portuguese Statistics Office (INE). Our data set covers the whole economy, including 16 sectors, and data on skilled and unskilled labor for manufacturing, and on male and female labor force for agriculture. To measure the evolution of wage inequality we estimate a Theil index. The results reveal an inverted-U curve with a peak in 1959. We proceed by estimating econometrically the relationship between wage inequality and per capita income growth, controlling for the influence of additional variables that capture the effects of industrialization, investment in human and physical capital, emigration, foreign trade and the size of the government. We find a significant relationship between wage inequality, real GDP per capita, human capital and the share of government spending.