Commodity booms narrow the skilled-worker income gap
A 10 percent commodity price increase reduces the skilled-to-unskilled labor income gap by 2.1 percent after four years, Emilio Colombi finds. The Bank of Canada published his research on October 16, 2026.
Construction drives the wage compression
Colombi estimates panel local projections for Bolivia, Chile, Colombia, Ecuador, Mexico and Peru over 1992–2019.
Following a 10 percent commodity price increase, construction output peaks around 8 percent above its initial level after two to three years; services expand around 2 percent.
Unskilled wages grow faster than skilled wages, driving almost all the income-gap reduction.
Investment peaks around 10 percent after two years, while GDP and consumption rise around 2 percent.
Sovereign spreads fall around 1 percentage point on impact, and the real exchange rate appreciates.
Metals and energy account for 9.3 percent of GDP but only 1.3 percent of employment on average, supporting a transmission channel outside extraction.
Saving strengthens the construction channel
In the multisector model, raising the commodity tax rate from 25 to 100 percent weakens private investment and moderates the income-gap reduction.
Public consumption and worker transfers produce identical aggregate outcomes under the baseline assumptions.
Saving 80 percent of the tax windfall in a sovereign wealth fund instead strengthens the reduction: public foreign assets lower country risk premiums, stimulating investment and construction.
The fund earns 3.6 percent annually and has a 4 percent payout rate.
Narrower gaps, not universal gains
The paper measures after-tax labor income before transfers, not total household inequality.
Its policy equivalence relies on hand-to-mouth workers, identical spending baskets and no labor-supply wealth effects.
Colombi also identifies potential long-run education costs as an unresolved research question.