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.