The impact of public policies on the reduction of inequality

International conference on the “Institutional Frameworks for social equity monitoring and improving the effectiveness of public policies in promoting equity”

Palais des Nataions: 15-16 December 2014

Outline1. Background

2. Elements of Algeria’s development strategy3. Assessment of the impact on inequality

4. Results and lessons learned

FactRapid rise of concern as to the social dimension of development the consequence of social stability and peace

ResponseFailure of structural adjustment policies and the worsening of poverty in numerous developing countries Since 2000, adoption of new development strategies (MDGs).

New issueHow to optimise social cohesion and accelerate the rate at which poverty is reduced, taking into account that 2/3 of the poor live in countries considered to be “middle-income”?

1. BackgroundLong period of stability and macroeconomic equilibrium• GDP: 4% average yearly growth (2000-2013) vs.

1.6% demographic growth (1998-2008)• Household GDP: 6.1% in 2011, 7.1% in 2013• GDP per capita: USD 5427.8 in 2011 and USD5

451.2 in 2013• Debt: 1.5% of GDP in 2013 (less than USD 4

million)• Foreign exchange reserves: USD 194 billion in

2013

An economy strong reliant on hydrocarbons• 98% of total exports in 2013• Portion of hydrocarbons in GDP: 39.9% in 2011 and

29.9% in 2013.

An economy that grows to the rhythm of hydrocarbon revenues

Source : FCE, Symposium 2012 : Pr Benabdellah et all.

2. Elements of Algeria’s Development Strategies

2. Elements of Algeria’s Development Strategies

Strategy for economic development• Finalize structural transformations:

• Financial development at the level of national savings• Restructuring of the real estate market• Better regulation of markets for goods and services

• Accelerate economic growth:• Adoption of laws to encourage private investment,• Adoption of the principle of non-discrimination between the local and international private

investment,• Upgrading and revitalization of public enterprises in priority sectors and making greater use of

public-private partnerships• Implementation of a national policy to promote public scientific research and industrial innovation• Adoption of a second National Economic and Social Pact

Fulfilling social needs and ensuring social justice have always been a major goal of the development strategies of Algeria since its independence.

2. Elements of Algeria’s Development Strategies

Strategy for human development • Develop the basic infrastructures to support human development

• A very generous policy, namely through the establishment of free health care, the democratization of education, price subsidies and the creation of a sophisticated social security system.

• Support job creation through active labour market policies• In 2008, the adoption of a new employment policy focused especially on youth (and young

graduates, in particular) is a characteristic landmark of this strategy.

• Strengthen national solidarity• The adoption of a civil agreement policy in 2001 was a turning point in the consolidation of peace

and national reconciliation.• The implementation of public programmes for vulnerable people

• Promote the greater autonomy of women and their increased participation in national development• The Constitution enshrines the principle of equality before the law for all citizens without

discrimination of any kind, including sex.• The national policy is in line with the commitments which Algeria has subscribed, namely through its

adherence, in 1996, to CEDAW.

2. Elements of Algeria’s Development Strategies

Three development programmes have been launched since 2000:

(i) poverty reduction, (ii) job creation, (iii) revitalization of rural areas, (iv) reduction of intra-national disparities, (v) stimulation of demand, (vi) support for SME and micro enterprises (vii) access to agricultural land and (viii) rehabilitation and expansion of basic infrastructures.

3. Assessment of the impact on inequality

• A concept that applies to a wide variety of indicators:• Economic (income vs. consumption ...)• Social (health, education, basic services ...)• Policy (participation in democratic life ...)

• A concept that lends itself to various types of measurement and analysis:• Different levels (micro, meso, macro)• Much discussion and controversy (technical and normative considerations)• Several approaches:

• Economic approach (income)• Normative approach (national thresholds)• Human Development Approach ‘IHDI’, the Inequality-adjusted Human

Development Index

3. Assessment of the impact on inequality

The Human Development Approach, ‘IHDI’• The IHDI (Inequality-adjusted Human Development Index) – introduced by UNDP and based on the work of Alkire

and Foster (2010) – was developed in order to address the concern with quantifying the level of inequality in society and in order to attenuate the unequal distribution of national wealth.

• Reflects the inequalities existing in the same dimensions of the IHD (health and longevity, level of education, and standard of living) by reducing the average value of each dimension depending on the level of inequality it presents.

• IHDI is calculated as a geometric mean of the geometric means, and considers each dimension separately.

IHDI = (1 – A) * IDH; aversion parameter = 1orA = 1 – (g/u); of the loss, in %, in HDI due to the inequalities observed in each dimension

4. Results and lessons learnedAlgeria is in the top 15 countries that significantly reduced their human development deficit since 1990 (RMDH 2013). A high-HD country

What to make of inequality?

4. Results and lessons learnedThe average annual gain takes the form of a 'W'?

- 1987-2000: multifaceted crisis + economic stabilization - 2000-05: Economic recovery - 2005-08: Economic consolidation - 2008 to date: Growth and social justice

Overall, a significant reduction in the deficit in HDI due to inequality (more than 30% in 1977, to 20% in 2013)

Average yearly gain

4. Results and lessons learned• Adult illiteracy is down:

• Over 80% in 1966; 22% & +10 year-olds in 2008 vs. 43.6% in 1995

• 11% of 15-24 year-old women vs. 4.6% of men in 2012

• Education indices are rising:• The expected duration of schooling increased

from 12.7 years in 2009 to 14.4 years in 2012

• The HD deficit is accentuated by the size “education” (historical weight)

• Algeria is in the world average and significantly higher up than the MENA average.

Breakdown of the HDI deficit

___ loss in longevity ___ loss in education___ loss in GNI

4. Results and lessons learned• Economic stabilization period took effect,

especially on education and health (austerity)• The consolidation period had an effect on

disposable income (wealth)

Pro-equity monitoring and alert mechanism

Average annual gain in longevity index

Average annual gain in education index

Average annual gain in GNI

4. Results and lessons learned

• Extremely young population• 56% of the population is aged under 30 and 28%, under 15

• Birth and marriage are high

• 978,000 in 2012 and 963,000 births in 2013• 371,280 in 2012 and 387,947 marriages in 2013

• Working age population is the largest in # but decreasing in relative terms• 64% in 2012 and 63.6% in 2013

• Senior population increasing, but low in relative terms• 7.4% in 2008 and 8.3% in 2013

Social demands are on the rise; at the same time, the labour force is increasingly qualified. Human development is growing, accompanied by a reduction in inequality

4. Results and lessons learned

• Hold knowledge-sharing meetings

• Encourage mechanisms / spaces for equity-focused monitoring and alert mechanisms (observatories)

• Work towards the strengthening of national statistical systems

Thank you!