red interamericana de protección social (ripso) mexico, df, august 10, 2011 1
DESCRIPTION
Excess Inequality (IDB, 2011) 3TRANSCRIPT
Inequality, Poverty and Public Policy in
Latin America Nora Lustig
Professor, Tulane UniversityNonresident Fellow, Center for Global
Development and Inter-American DialogueRed Interamericana de Protección Social (RIPSO)
Mexico, DF, August 10, 2011 1
2
Gini Coefficient by Region (in %), 2004
32.233.6
38.9 38.9 39.1
44.7
53.2
20.0
25.0
30.0
35.0
40.0
45.0
50.0
55.0
60.0
High Income Europe andCentral Asia
South Asia North Africaand the
Middle East
East Asia andthe Pacific
Sub-SaharanAfrica
Latin Americaand the
Caribbean
Gin
i coe
ffici
ent
Excess Inequality (IDB, 2011)
3
Excess Poverty (IDB, 2011)
4
Trends in Poverty: 1995-2009 (IDB, 2011)
5
6
Declining Inequality in LA:
How Much? Since When?Why?Will it continue?
7
Extension of findings in our 2010 book and UNDP-sponsored project:
Trends in InequalityGini Coefficient Early 1990’s-Late 2000’s
Light Grey: Countries with Falling Ineq (Lustig et al., 2011)
8Early 90s
(12 countries)Mid-90s
(15 countries)Late 90s
(16 countries)Mid-2000s
(17 countries)Late 2000s
(17 countries)
0.480
0.490
0.500
0.510
0.520
0.530
0.540
0.550
0.509
0.523
0.530
0.518
0.503
0.520
0.537
0.540
0.524
0.502
9
Gini Coefficient Early 1990’s-Late 2000’s (same countries throughout)
Early 90s Mid-90s Late 90s Mid-2000s Late 2000s0.475
0.480
0.485
0.490
0.495
0.500
0.505
0.510
0.515
0.520
0.525
0.510
0.5190.520
0.508
0.492
Declining Inequality in LA: How Much? Decline is significant
Inequality has declined in 13 out of 17 countries (roughly 1% a year) between (circa) 2000 and (circa) 2008;
Decline is statistically significant in all but one case
Decline occurred while inequality in other parts of the world has been on the rise
Decline continued through the global financial crisis in 2009
Order of magnitude: higher (and in some cases much more so) than increase in previous period, for example
Growth has been notoriously “pro-poor”10
11
Change in Gini Coefficient by Country: circa 2000-2008 (yearly change in percent) SEDLAC
12
Change in Gini Coefficient by Country: circa 2000-2009 (yearly change in percent) SEDLAC
13
Comparing the Increase in the 1990’s with Decline in the 2000’s
1992
-200
2
2002
-200
9
1997
-200
3
2003
-200
9
1997
-200
3
2003
-200
9
1995
-200
1
2001
-200
8
1985
-199
8
1998
-200
9
1989
-200
1
2001
-200
9
1989
-199
6
1996
-200
8
1989
-200
2
2002
-200
6
1992
-199
8
1998
-200
9
2000
-200
3
2003
-200
9
1997
-200
2
2002
-200
7
Argentina Peru Paraguay El Sal-
vador
Brazil Panama Mexico Venezuela Chile Dominican Rep.
Bolivia
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.08.2
-8.4
2.7
-7.4
0.1
-6.2
2.6
-6.0
4.1
-5.4
1.5
-4.4
2.5
-4.2
5.0
-4.1
0.8
-3.5
0.1
-3.1
2.1
-2.9
2.7
-5.0
Change of Gini in percentage points Average of increase Average of decrease
-5
-3
-1
1
3
5
7
9
11
13
15
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
Aver
age
annu
al g
row
th ra
te (%
)
Distribution of countries (%)
Distribution of countries according to the average per capita GDP growth rate between 1990 and 2005
Brazilian top 10%
Brazilian bottom 10%
China
Germany
Haiti
Income of the Brazilian poor has been growing as fast as per capita GDP in China while income of the richest ten percent has been growing like Germany’s per capita GDP
Declining Inequality in LA: How Much? Decline is Robust
Definition of income (monetary or total)/per capita or AEU/consumption
End years
Inequality indicator
Data source (UNECLAC or SEDLAC, the latter is used here) 15
Yearly Change in Gini: Three yr averages at end pts. (in %)
El S
alva
dor
Para
guay
Arg
entin
a
Chi
le
Ecua
dor
Peru
Pana
ma
Bra
zil
Mex
ico
Bol
ivia
Dom
inic
an R
epub
lic
Cos
ta R
ica
Ven
ezue
la
Gua
tem
ala
Uru
guay
Hon
dura
s
Nic
arag
ua
Tota
l 13
Tota
l 17
Chi
na
Indi
a
Sout
h A
fric
a
OEC
D-3
0
-2.00
-1.50
-1.00
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
-1.48
-1.05-1.05-1.02-1.01-0.95-0.94-0.91-0.72
-0.52-0.35-0.33-0.24
0.05
0.460.68
1.02
-0.81-0.49
2.02
1.43
0.30 0.25
Ann
ual P
erce
nt C
hang
e
17
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.00.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
Uru
PerMex
Hon
Gua
DRChi
Bra
Bol
Arg
Ratio Centiles 95/5 in 2000
Rat
io C
entil
es 9
5/5
in 2
009
18
Change in Gini Coefficient by Country: circa 2000-2008 (yearly change in percent) UNECLAC
Ven
ezue
la
Nic
arag
ua
Arg
entin
a
Bol
ivia
Peru
Para
guay
Bra
zil
El S
alva
dor
Pana
ma
Chi
le
Uru
guay
Ecua
dor
Mex
ico
Hon
dura
s
Cos
ta R
ica
Dom
inic
an R
ep.
Gua
tem
ala
Tota
l 14
Tota
l 17
-4.00
-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
-2.93
-2.03 -1.94-1.60
-1.33 -1.27 -1.23 -1.12 -1.11-0.79 -0.69 -0.51 -0.45 -0.27
0.38
0.98
1.98
-1.23-0.82
Ann
ual P
erce
nt C
hang
e
Declining Inequality in LA: Since When? For more than/almost a decade
In three countries, during second half of 1990s: Mexico, Brazil and Chile
In six, started in 2002-2003: Argentina, Bolivia, El Salvador, Paraguay, Panama and Peru
19
20
First Year in Which Inequality Started to Decline
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Dominican Republic, Ecuador, Paraguay, Peru
Argentina, Bolivia, Venezuela
El Salvador, Panama
Brazil, Chile
Mexico
Yea
r w
hen
ineq
ualit
y st
arte
d to
dec
line
Declining Inequality in LA: How Much? Decline in has been widespread
Persistently high inequality countries (Brazil) and normally low inequality countries (Argentina and Venezuela)
Fast growing countries (Chile and Peru), slow growing countries (Brazil and Mexico) and countries recovering from crisis (Argentina and Venezuela)
Countries with left “populist” governments (Argentina), left social-democratic governments (e.g., Brazil, Chile) and center/center-right governments (e.g., Mexico and Peru) 21
22
Gini (Circa 2000)
Total
Brazil
Bolivia
Paraguay
Panama
Honduras
Chile
Ecuador
Guatemala
Peru
Mexico
Dominican Rep.
El Salvador
Argentina
Nicaragua
Costa Rica
Venezuela
Uruguay
40.0 42.0 44.0 46.0 48.0 50.0 52.0 54.0 56.0 58.0 60.0
52.9
58.8
58.5
56.6
56.5
55.5
55.2
54.5
54.2
54.0
53.8
51.9
51.9
50.4
50.2
49.9
44.1
44.0
Gini Coefficient in Percent
23
Growth and Inequality: Chile
24
Growth and Inequality: Mexico
25
Growth and Inequality: Argentina (Greater Buenos Aires)
26
Yearly Change in Gini: Left and Non-left Regimes (circa 2000-2009)
Arg
entin
a
Bra
sil
Ven
ezue
la
Chi
le
Uru
guay
Left-
win
g
El S
alva
dor
Pana
ma
Mex
ico
Peru
Hon
dura
s
Non
-left
-1.5
-1.0
-0.5
0.0
0.5
1.0
-1.23-1.07 -1.07
-0.66
0.12
-0.78
-1.29
-0.97
-0.77
-0.39
0.79
-0.53
Why has inequality declined in Latin America? Are there factors in common?
In-depth analysis (Lopez-Calva and Lustig, 2010 and UNDP project paper for Chile and Uruguay): Argentina (Gasparini and Cruces) (urban; 2/3
of pop) Brazil (Barros, Carvalho, Mendoca & Franco) Chile (Eberhard and Engel) (labor earnings) Mexico (Esquivel, Lustig and Scott) Peru (Jaramillo & Saavedra) Uruguay (Alves, Amarante, Salas and
Vigorito); rising inequality most of the period; declines in 07-09
27
Why has inequality declined? Main findings Educational upgrading and a more
equal distribution of educational attainment have been equalizing (quantity effect). No “paradox of progress” this time.
Changes in the steepness of the returns to education curve have been equalizing at the individual workers level (price effect). Except for Peru, they have been equalizing at the household level too. 28
29
Schooling Inequality: Argentina (urban), Brazil, Mexico and Peru (Gini Coefficients) Gini Coefficients for Education for Argentina, Brazil, Mexico and Peru SEDLAC: March 2011
30
Schooling inequality cont.: Chile
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20090.15
0.20
0.25
0.30
0.35
31
32
Returns to educ (cont.): Chile
1990 1998 2000 2006 20090.0
0.2
0.4
0.6
0.8
1.0
1.2
Primary Secondary Tertiary
Ret
urns
Why has inequality declined? Main findingsChanges in government transfers
were equalizing:
more progressive government transfers (monetary and in-kind transfers); better targeting
expansion of coverage increase in the amount of transfers
per capita
33
Why has the skill premium declined? Conjecture: Increase in relative demand for skilled
labor petered out: Fading of the unequalizing effect of skill-biased technical change in the 1990s: Argentina, Mexico & Peru
Decline in relative supply of low-skilled workers: Expansion of basic education since the 1990s: Brazil, Mexico and Peru; expansion of access to post-secondary in Chile
Supply vs. Demand: THIS SHOULD BE THE FOCUS OF FUTURE RESEARCH 34
35
36
Composition of adult pop cont.: Chile
1990 1998 2000 2006 20090.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
Incomplete primary Primary Secondary Tertiary
Perc
ent
Why has earnings inequality declined?
Other effects: Decline in spatial labor market
segmentation in Brazil. FUTURE RESEARCH: PATTERNS OF GROWTH AND DECLINING SPATIAL WAGE DIFFERENTIALS
In the case of Argentina, the decline also driven by a pro-union government stance and by the impetus to low-skill intensive sectors from devaluation. In Brazil, increase in minimum wages. FUTURE RESEARCH: DISENTANGLE INSTITUTIONAL FROM MARKET FACTORS 37
Why has inequality in non-labor incomes declined? New forms of SOCIAL PROTECTION have
been key In particular, Conditional (and
Unconditional) Cash Transfers: Bolsa Familia (Brazil) and Oportunidades (Mexico); Jefes y Jefas y Asignacion Universal por Hijo (Argentina); Juancito Pinto (Bolivia); etc.
In Brazil and Mexico, large-scale conditional cash transfers => can account for between 10 and 20 percent of reduction in overall inequality. An effective redistributive machine because they cost around .5% of GDP. 38
Conclusions It appears that in the race between skill-
biased technological change and educational upgrading (Tinbergen’s theory), in the last ten years the latter has taken the lead; the opposite of what has happened in the US (Goldin and Katz, 2008)
Perhaps as a consequence of democratization and political competition, government (cash and in-kind) transfers have become more generous and targeted to the poor (Robinson, 2010)
39
Conclusions
Trends in declining skill-premium continued through 2009 (most recent data points available) for the most part
Also, since 2008/9, Argentina and Brazil expanded spending on programs targeted to the poor; Pension Moratorium and Universal per Child Transfers in Argentina are potentially very redistributive
40
Is Inequality Likely to Continue to Fall?
Despite the observed progress, inequality continues to be very high and the bulk of government spending is not progressive.
The decline in inequality resulting from the educational upgrade of the population will eventually hit the ‘access to tertiary education barrier’ which is much more difficult to overcome: inequality in quality and ‘opportunity cost’ are high and costly to address.
Making public spending more progressive in the future is likely to face more political resistance (entitlements of some powerful groups).
41
42
The Big Challenge of Social Protection Coping with adverse shocks:
Economic Crises: unemployment, falling incomes
Natural Disasters
Spikes in Food Prices
43
Role of Networks such as RIPSO Crucial Exchange of know-how; what works; what
doesn’t extremely valuable for: Efficiency and efficacy of programs Political survival of programs
Access to high quality education; instruments to cope with systemic shocks; how to deal with tensions between programs who target the poor and universal coverage/middle class social protection
Integrate evaluation results to the exchange; better measures of inequality
Gracias!
44