The Effect of Dollarization on Socioeconomic Inequality in Ecuador

The bachelor's thesis examines the impact of dollarization on socioeconomic inequality in Ecuador. The aim of the thesis is to determine whether dollarization has led to a reduction or deepening of income inequality. Inequality is measured using the Gini coefficient. The thesis combines a theoretical framework of socioeconomic inequality with an econometric model based on data from 1990 to 2020. In this regard, the work builds on the existing research by Ybrayev, extending the analysis of the impact of dollarization on the economy to include the perspective of socioeconomic inequality, which has so far been largely absent in the literature. The results of the analysis indicate that dollarization had a negative impact on income distribution in the case of Ecuador. The model reveals an adjusted impact of dollarization on the Gini coefficient of 15.6%. In contrast, the variables "GDP per capita growth" and "time trend" were found to reduce inequality. The thesis provides recommendations for economies considering pegging their national currency to another global currency. It suggests that dollarization should be implemented in coordination with specific fiscal and social policy tools, such as the adaptation of social safety nets. The data indicate that in the case of Ecuador, the lack of integration with fiscal and social policies led to a significant deepening of socioeconomic inequality, resulting in numerous negative consequences.