Transcript How committed are Latin American Governments to equity? Otaviano Canuto Vice President Poverty Reduction and Economic Management World Bank.

How committed are Latin
American Governments to
equity?
Otaviano Canuto
Vice President
Poverty Reduction and Economic Management
World Bank
1
What explains the decline in inequality?

A stronger labor market associated with fewer jobless workers and
higher wages for unskilled workers
◦

López-Calva and Lustig (2010), Jaramillo and Saavedra (2010) for Peru, Azevedo
et al (2012)
Demographic changes and greater female labor force participation
◦ Gray Molina and Yañez (2009) for Bolivia

A more progressive fiscal policy including redistributive public
policies through transfers.
◦ López-Calva and Lustig (2010) and Jaramillo and Saavedra (2010) for Peru

A more active role in the labor market where governments took a
more pro-union stance and raised minimum wages and pensions
◦ Gasparini and Lustig (2011)
2
How important were these forces
to inequality reduction?
Contributions to Change in Income Inequality, LAC
Residual, 13%
95%
Other Non-labor , 11%
75%
55%
35%
15%
Transfers, 14%
45% of the
reduction in
inequality was
due to higher
labor incomes
per hour.
Pensions, 7%
1%
Transfers
contributed 14%
to the decline in
inequality for the
region.
Pensions
accounted for
7%.
Labor income per hour,
45%
Adult population, 12%
-2%
-5%
Source: Azevedo, Inchauste and Sanfelice, 2012. The World Bank.
3
Labor incomes grew much faster for
lowest quintiles
Average annual growth rate in per capita income by tenths of the
distribution: Brazil, 2001-2009
9
Bottom 10%
8
Annual growth rate (%)
7
6
5
4
Top 10%
3
Average
2
1
0
First
Second
Third
Fourth
Fifth
Sixth
Seventh
Eighth
Ninth
Tenth
4
How has policy helped to reduce
inequality?
 Macro
stability
◦ (inflation is a regressive tax)
 Expansion
of access to education and
health services
 Social
protection / safety nets (CCTs)
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Source: IMF WEO, 2012.
Venezuela
Jamaica
Guatemala
Trinidad and Tobago
Suriname
Belize
Ecuador
Panama
Guyana
The Bahamas
Costa Rica
Barbados
Honduras
Haiti
Dominican Republic
Antigua and Barbuda
St. Lucia
El Salvador
St. Vincent and the Grenadines
St. Kitts and Nevis
Grenada
Dominica
Paraguay
Mexico
Colombia
Nicaragua
Chile
Bolivia
Uruguay
Peru
Brazil
Argentina
Maintaining macroeconomic
stability…
Difference in inflation, 1980 versus 2010
(percentage point difference in annual CPI inflation)
20
0
-20
-40
-60
-80
-100
6
However, this is not enough
 Inequality
in outcomes continue to
be high
 Inequality
of opportunities
perpetuate these trends
7
Two Latin-american children:
Probability of finishing 6th grade on time
Jamaica
Argentina
Boy with 4 siblings in a rural home,
México
uneducated head of household,
income at extreme poverty level
Chile
El Salvador
Venezuela
Panamá
Bolivia
Paraguay
Uruguay
Honduras
Ecuador
Costa Rica
R. Dominicana
Colombia
Child with one sibling in an urban home,
Perú
household head has secondary education,
Guatemala
family income per capita of US$25 a day
Nicaragua
Brasil
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
The Case of Brazil

It is the best—largest and fastest—
performer in reducing inequality

Equality of opportunity is a political
priority

Uses evidence to guide policy
9
Brazil: Best performer in reducing
inequality…
Evolution of the degree of inequality in per capita income:
Brazil, 1995-2009
0.65
0.634
0.64
0.63
0.615
0.62
0.612
Gini coefficient
0.61
0.599
0.60
0.588
0.589
0.582
0.594
0.600
0.602
0.600
0.598
0.596
0.59
0.58
0.599
0.592 0.594
0.580
0.587
0.587
0.581
0.569
0.566
0.57
0.56
0.560
0.552
0.55
0.544
0.54
0.539
0.53
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
10
…and the president committed to
flatten the slope of this graph by the
end of her term...
Extreme poverty by age after transfers:
Brazil, 2009
20
Percentage of the population below the
extreme poverty line
18
16
14
12
10
Average
8
6
4
2
0
0
5
10
15
20
25
30
35
40
Age (years)
45
50
55
60
65
70
75
11
Thank you…
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