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Red Interamericana de Protección Social (RIPSO) Mexico, DF, August 10, 2011 1 60.0 55.0 53.2 Gini coefficient 50.0 44.7 45.0 40.0 35.0 32.2 38.9 38.9 39.1 South Asia North Africa and the Middle East East Asia and the Pacific 33.6 30.0 25.0 20.0 High Incom e Europe and Central Asia Sub-Saharan Latin Am erica Africa and the Caribbean 2 Excess Inequality (IDB, 2011) 3 Excess Poverty (IDB, 2011) 4 Trends in Poverty: 1995-2009 (IDB, 2011) 5 How Much? Since When? Why? Will it continue? 6 7 Trends in Inequality Gini Coefficient Early 1990’s-Late 2000’s Light Grey: Countries with Falling Ineq (Lustig et al., 2011) 0.550 0.540 0.540 0.537 0.530 0.530 0.524 0.523 0.520 0.520 0.510 0.518 0.509 0.503 0.502 0.500 0.490 0.480 Early 90s (12 countries) Mid-90s (15 countries) Late 90s countries) (16 Mid-2000s (17 countries) Late 2000s countries) (17 8 0.525 0.519 0.520 0.520 0.515 0.510 0.510 0.508 0.505 0.500 0.495 0.492 0.490 0.485 0.480 0.475 Early 90s Mid-90s Late 90s Mid-2000s Late 2000s 9 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 Change in Gini Coefficient by Country: circa 2000-2008 (yearly change in percent) SEDLAC 11 Change in Gini Coefficient by Country: circa 2000-2009 (yearly change in percent) SEDLAC 12 Change of Gini in percentage points Average of increase Average of decrease 10.0 8.2 8.0 6.0 5.0 4.1 4.0 2.7 2.6 2.5 2.1 1.5 2.0 0.8 0.1 2.7 0.1 0.0 -2.0 -4.0 -4.2 -4.4 -6.0 -8.0 -5.4 -6.0 -6.2 -2.9 -5.0 -3.1 -3.5 -4.1 -7.4 Argentina Peru Paraguay El Salvador Brazil Panama Mexico Venezuela Chile Dominican Rep. 2002-2007 1997-2002 2003-2009 2000-2003 1998-2009 1992-1998 2002-2006 1989-2002 1996-2008 1989-1996 2001-2009 1989-2001 1998-2009 1985-1998 2001-2008 1995-2001 2003-2009 1997-2003 2003-2009 1997-2003 1992-2002 -10.0 2002-2009 -8.4 Bolivia 13 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 Distribution of countries according to the average per capita GDP growth rate between 1990 and 2005 15 Average annual growth rate (%) 13 11 China 9 Brazilian bottom 10% 7 5 3 Germany 1 Brazilian top 10% -1 -3 Haiti -5 0 5 10 15 20 25 30 35 40 45 50 55 60 Distribution of countries (%) 65 70 75 80 85 90 95 100 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 OECD-30 0.46 South Africa 1.50 India China -0.95 -0.94 -0.91 Total 17 -0.72 Total 13 Nicaragua 1.00 Honduras 0.50 Uruguay Guatemala -0.35 -0.33 Venezuela -0.52 Costa Rica -0.50 Dominican Republic Bolivia Mexico Brazil -1.05 -1.05 -1.02 -1.01 Panama -1.00 Peru Ecuador Chile Argentina Paraguay El Salvador Annual Percent Change 2.50 2.00 2.02 1.43 1.02 0.68 0.05 0.30 0.25 0.00 -0.24 -0.49 -0.81 -1.50 -1.48 -2.00 90.0 80.0 Ratio Centiles 95/5 in 2009 70.0 60.0 50.0 Bol Hon 40.0 30.0 Gua Per Mex 20.0 Bra Arg Chi DR Uru 10.0 0.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 Ratio Centiles 95/5 in 2000 70.0 80.0 90.0 17 Total 17 -1.12 -1.11 -1.33 -1.27 -1.23 Total 14 2.00 Guatemala 1.00 Dominican Rep. Costa Rica -0.51 -0.45 Honduras Mexico -0.79 -0.69 Ecuador Uruguay -1.00 Chile Panama El Salvador Brazil Paraguay Peru Bolivia Argentina -2.00 Nicaragua -3.00 Venezuela Annual Percent Change 3.00 1.98 0.98 0.38 0.00 -0.27 -0.82 -1.23 -2.03 -1.94 -1.60 -2.93 -4.00 18 In three countries, during second half of 1990s: Mexico, Brazil and Chile In six, started in 2002-2003: Argentina, Bolivia, El Salvador, Panama and Peru Paraguay, 19 2004 Dominican Republic, Ecuador, Paraguay, Peru 2003 Year when inequality started to decline 2002 Argentina, Bolivia, Venezuela 2001 El Salvador, Panama 2000 1999 1998 Brazil, Chile 1997 1996 Mexico 1995 1994 20 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 Gini (Circa 2000) Uruguay 44.0 Venezuela 44.1 Costa Rica 49.9 Nicaragua 50.2 Argentina 50.4 El Salvador 51.9 Dominican Rep. 51.9 Mexico 53.8 Peru 54.0 Guatemala 54.2 Ecuador 54.5 Chile 55.2 Honduras 55.5 Panama 56.5 Paraguay 56.6 Bolivia 58.5 Brazil 58.8 Total 40.0 52.9 42.0 44.0 46.0 48.0 50.0 52.0 Gini Coefficient in Percent 54.0 56.0 58.0 60.0 22 23 24 25 Non-left Honduras -0.5 Peru -0.78 Mexico -1.0 Panama -1.23 El Salvador Left-wing Uruguay Chile -1.07 Venezuela Brasil Argentina 1.0 0.79 0.5 0.12 0.0 -0.39 -0.53 -0.66 -0.77 -1.07 -0.97 -1.5 -1.29 26 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 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 Schooling Inequality: Argentina (urban), Brazil, Mexico and Peru Gini Coefficients for Education for Argentina, Brazil, Mexico and Peru Coefficients) (Gini March 2011 SEDLAC: 29 0.35 0.30 0.25 0.20 0.15 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2009 30 31 Primary Secondary Tertiary 1.2 1.0 Returns 0.8 0.6 0.4 0.2 0.0 1990 1998 2000 2006 2009 32 Changes 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 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 Incomplete primary Primary Secondary Tertiary 40.0 35.0 30.0 Percent 25.0 20.0 15.0 10.0 5.0 0.0 1990 1998 2000 2006 2009 36 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 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 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 inkind) transfers have become more generous and targeted to the poor (Robinson, 2010) 39 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 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 Coping with adverse shocks: Economic Crises: unemployment, falling incomes Natural Disasters Spikes in Food Prices 42 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 43 44