Pay Inequality in Cuba: the Special Period and After

Abstract

This paper analyzes the evolution of pay inequality in Cuba from the early 1990s through 2004, during what was known as the “Special Period in Times of Peace” and after. We measure pay inequality across sectors and regions, using the between-groups component of Theil’s T statistic, and we map the changing components of that statistic in order to provide a compact summary of structural change in Cuba. This method helps us to observe the transition of the Cuban economy from one based fundamentally on sugar to one based largely on services, especially tourism, but also others with greater growth potential, such as information technology, pharmaceuticals, and biotechnology. Regionally, we observe that a main dividing line between winners and losers is the presence of tourist attractions: the recent increase of regional pay inequality is associated primarily with changing incomes in the city of Havana and the province of Matanzas.