Executive Summary Regional Human Development Report for Latin America and the Caribbean 2010

In terms of equality, Latin America and the Caribbean ranks last on the worldwide stage, with inequality being one of the main hurdles to overcome for reducing poverty, improving human development, and expanding people’s effective freedom to choose between different options in life that matter to them. The persistent nature of inequality in the region, accompanied by low levels of social mobility, have created an “inequality trap,” a vicious cycle that is difficult to break. How can this situation be remedied? What public policies can be designed that are capable of breaking the intergenerational transmission of inequality? Why have political systems and redistribution mechanisms been unable to reverse this pattern? This first Regional Human Development Report for Latin America and the Caribbean 2010 proposes answers to these questions, based on the fundamental conviction that it is in fact possible to break the intergenerational transmission of inequality in Latin America and the Caribbean, and, what is more, that only by implementing policies aimed at combating inequality will efforts to reduce poverty have any real chance of success. The United Nations Development Programme (UNDP) maintains that equality is necessary for ensuring people’s effective freedoms, and for expanding the range of options from which all individuals are truly able and empowered to choose throughout their lives. Acting on the future: breaking the intergenerational transmission of inequality Based on the human development approach and following the conceptual framework that has inspired the UNDP’s work since 1990, this first Regional Human Development Report for Latin America and the Caribbean 2010, Acting on the future: breaking the intergenerational transmission of inequality, seeks to fully understand the phenomenon of inequality and to serve as a useful instrument in the design of public policy measures that are adaptable to the specific circumstances of each country. These pages constitute a call to break the historic vicious circle of pronounced inequality, through specific and effective measures. The aim of this Regional Human De- velopment Report for Latin America and the Caribbean 2010 is to articulate a call to action, a call to take action on the future, today.

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Santillana www.idhalc-actuarsobreelfuturo.org Executive Summary

Regional Human Development Report for Latin America and the Caribbean 2010

Acting on the future: breaking the intergenerational transmission of inequality Regional Human Development Report for Latin America and the Caribbean 2010 Acting on the future: breaking the intergenerational transmission of inequality www.idhalc-actuarsobreelfuturo.org

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Printed in Costa Rica by Editorama, S.A. September 2010 Executive Summary

Regional Human Development Report for Latin America and the Caribbean 2010

Acting on the future: breaking the intergenerational transmission of inequality United Nations Development Programme Team responsible for editing the Regional Human (UNDP) Development Report for Latin America and the Caribbean 2010 Helen Clark Administrator of the United Nations Development General Co-ordination and Principal Authors Programme (UNDP) Luis Felipe López-Calva Chief Economist and Co-ordinator of the area of Poverty, Rebeca Grynspan MDG and Human Development Associate Administrator of the United Nations United Nations Development Programme (UNDP) Development Programme (UNDP) Regional Bureau for Latin America and the Caribbean (RBLAC)

UNDP Regional Bureau for Latin America Isidro Soloaga and the Caribbean (RBLAC) Professor of Economics, El Colegio de México

Heraldo Muñoz Editorial Team Assistant Secretary General of the United Nations, Aniel Altamirano, UNDP Consultant UNDP Assistant Administrator and Regional Director Gabriela Cordourier, UNDP Consultant for Latin America and the Caribbean Mariana Enghel, UNDP Consultant Alfredo González, UNDP Consultant Luis Felipe López-Calva Roberto Pablo Morales, UNDP Consultant Chief Economist and Co-ordinator for the area of Helena Rovner, UNDP Consultant Poverty, MDG and Human Development Strategic Planning and Communication Team Pedro Manuel Moreno Pablo Basz Programme Specialist, area of Poverty, MDG and Communications Advisor, RBLAC Human Development Armando Carballido Gómez UNDP Consultant and Communication Strategy Co-ordinator

Pedro Manuel Moreno Programme Specialist, area of Poverty, MDG and Human Development, RBLAC

Consultants Gabriela Agosto, Social Observatory Argentina Sabine Alkire, Oxford Poverty & Human Development Initiative (OPHI) Aniel Altamirano, UNDP Consultant María Laura Alzúa, Universidad Nacional de la Plata, Centre for Distributive, Labour and Social Studies (CEDLAS) Eduardo Amadeo, Social Observatory Argentina Verónica Amarante, Universidad de la República, Uruguay Mabel Andalón, Cornell University Eva Arceo-Gómez, El Colegio de México Rodrigo Arim, Universidad de la República, Uruguay Irma Arriagada, UNDP Consultant Silvia Casanovas, UNDP Consultant Caterina Colombo, UNDP Consultant Ana Contreras, Princeton University Florian Wendelspiess Chávez Juárez, UNDP Research Assistant Dante Contreras, UNDP and Universidad de Chile Gaston Yalonetzky, Oxford Poverty & Human Development University of Chile Initiative (OPHI) Gabriela Cordourier, UNDP Consultant José Zubizarreta, New York University Guillermo Cruces, Universidad Nacional de la Plata, Centre for Distributive, Labour and Social Studies (CEDLAS) Special collaboration Marcelo Delajara, Bank of Mexico Joseph Deutsch, Bar-Ilan University UNDP Rafael Di Tella, Harvard University Jessica Braver, RBLAC Juan Dubra, Universidad de Montevideo Elia Carrasco, RBLAC Carlos Elizondo Mayer-Serra, Centre for Economic María Victoria Duque López, RBLAC Research and Education , Mexico Jacqueline Estevez, RBLAC Gary S. Fields, Cornell University Almudena Fernández, RBLAC James E. Foster, The George Washington University Carolina Moreno, RBLAC Néstor Gandelman, ORT University Uruguay Eduardo Ortiz-Juárez, RBLAC Leonardo Gasparini, Universidad Nacional de la Plata, Stefano Pettinato, RBLAC Centre for Distributive, Labour and Social Studies (CEDLAS) Cecilia Ugaz, Deputy Resident Representative, UNDP Argentina Garance Genicot, Georgetown University Mónica Villanueva, UNDP Research Assistant Jérémie Gignoux, Paris School of Economics Florian Wendelspiess, UNDP Research Assistant Alfredo González Reyes, UNDP Consultant Julio Guzmán, The University of Chicago UNOPS Carolina Izaguirre, Ministry of Social Development Marialicia Ayala (Sedesol), Mexico, UNDP Consultant Ivonne Castañeda Ravi Kanbur, Cornell University Claudia Nochez-Palacios Kevin Macdonald, The World Bank Mariana Marchionni, Universidad Nacional de la Plata, Translator Centre for Distributive, Labour and Social Studies (CEDLAS) Ibai Aramburuzabala Arrieta David Mayer-Foulkes, Centre for Economic Research and Education , Mexico Proofreader Johannes M. Metzler, Ludwig-Maximilians-Universität München Cynthia Celde Roberto Pablo Morales, UNDP Consultant Eduardo Ortiz-Juárez, RBLAC Advisory Council Thomas Otter, Independent Consultant Mónica Pachón, Universidad de los Andes Alicia Bárcena, ECLAC Debraj Ray, New York University Jere R. Behrman, University of Pennsylvania Gonzalo Salas, Universidad de la República, Uruguay Nancy Birdsall, Center for Global Development Emma Samman, Oxford Poverty & Human Francisco H. G. Ferreira, The World Bank Development Initiative (OPHI) Sakiko Fukuda-Parr, The New School Maria Emma Santos, Oxford Poverty & Carol Graham, The Brookings Institution Human Development Initiative (OPHI) Rebeca Grynspan, UNDP Janice Natalie Seinfeld Lemlig, Universidad del Pacífico, Peru Selim Jahan, UNDP Suman Seth, Oxford Poverty & Human Development Bernardo Kliksberg, UNDP Initiative (OPHI) Jeni Klugman, UNDP Jacques Silber, Bar-Ilan University Thierry Lemaresquier, Consultant Benita Thompson, The University of the West Indies Nora Lustig, Tulane University Florencia Torche, New York University José Luis Machinea, Universidad Torcuato Di Tella Miguel Urquiola, Columbia University Alejandro Toledo, SAIS-Johns Hopkins University Sergio Urzúa, Northwestern University Michael Walton, Harvard University Andrea Vigorito, Universidad de la República, Uruguay Ernesto Zedillo, Yale University Foreword

Inequality is one of the main traits that define the history of Latin America and the Caribbean. A significant and persistent inequality, accompanied by low social mobility, has led the region to fall into an “inequality trap”; a vicious circle that is difficult to break. How can we put an end to this situation? What public policies can be designed to prevent inequality being transmitted from one generation to the next? Why have the political system and the redistribution mechanisms not been effective in reversing this pattern? This first Regional Human Development Report for Latin America and the Caribbean offers answers to these and other questions. The central message is that yes, it is possible to reduce inequality in Latin America and the Caribbean. It is a fact that up until the global economic crisis, a large number of countries had achieved reductions in inequality by expanding coverage of basic social services and ensuring a more progressive impact of social spending. This occurred thanks to a consensus that was forged regarding the need to be more efficient in fighting poverty. This report reaffirms the central importance of the fight against poverty, but it suggests that there is a need to go further. Inequality per se is an obstacle on the road to human development and the reduction of inequality should form an explicit part of the public agenda. For the UNDP, equality matters in the area of effective freedoms; that is, in terms of broadening the options that are truly available to everyone, and among which people are free to choose. Opportunities and access to goods and services are important, but so is the process that enables individuals to play an active role in their own development, and in this way improve their own lives as well as their immediate environment. In this context, the new, specific and comprehensive policy proposed for reducing

6 Executive Summary inequality in the region must have an impact on households’ objec- appreciate that households face multiple constraints, and tive conditions, on the constraints they face, on subjective aspects that these often thrive off one another. Moreover, the that determine individuals’ aspirations for greater autonomy and beneficiaries of these policies must, adopt the objectives mobility, and finally, on the quality and the effectiveness of politi- of public policy as their own, and become active agents in cal representation and the state’s redistributive capacity. their own development. Other important messages are: Based on a human development approach and following the 1. The inequality observed in income, education, life expectacy UNDP vision since 1990, this Report seeks to promote a deeper and other indicators persists from one generation to the understanding of inequality, find answers to key questions, and next and, moreover, it is also associated with a context of propose specific measures that can be adapted to the environment low social mobility; and conditions of each country. Following the traditional practice 2. Gaining a clearer understanding of these mechanisms for of Human Development Reports, UNDP in Latin America and transmitting households’ achievements will facilitate the the Caribbean will foster debates throughout the region to discuss design of more effective policies for breaking the vicious the Report’s implications and how best to adapt the approach to circles through with poverty and inequality are transmitted specific realities, and in doing so, will generate a programmatic from one generation to the next; agenda for equality. The Report that we are launching today is 3. There are subjective factors that are determined by binding intended to become an instrument that will enrich national and constraints, and these are fundamental for explaining the regional debates on the need for a more comprehensive public differences in socio-economic achievement; policy approach, including actions aimed at strengthening states’ 4. The causes underpinning the persistence of inequality are not redistributive and regulatory instruments. It is a call for specific confined soley to within the household.. The political process and effective measures capable of breaking the vicious circle of also responds differently to the needs of different groups. pronounced inequality. In short, it is a call to action, to take ac- A sustained reduction in inequality means impacting the tion on the future, today. poor quality of political representation, the frailty of public institutions, unequal access to influence specific policies, and institutional shortcomings that lead to corruption and Heraldo Muñoz the state ending up in the hands of minority groups. Assistant Secretary General of the United Nations, 5. The Report proposes a fully comprehensive approach for UNDP Assistant Administrator and Regional Director public policy. Redistribution strategies must reach those for Latin America and the Caribbean groups for whom they were designed. These policies should

Regional Human Development Report for Latin America and the Caribbean 2010 7 Acknowledgments

The Report team started to work in February 2008, under the auspices of the UNDP Regional Bureau for Latin America and the Caribbean, directed by Rebeca Grynspan, currently the United Nations Under- Secretary General and Associate Administrator of the United Nations Development Program (UNDP). The Co-ordination Team and the authors of the Report would like to thank Ms Grynspan for her intellectual contributions, drive and support for this Report. Special thanks for their generous support go to the Spanish Agency for International Development Co-operation (AECID), through its Spain-UNDP Fund, Towards Integrated and Inclusive Development in Latin America and the Caribbean, without which, it would not have been possible to carry out this work. The contributions made by the members of the Report’s Advi- sory Council during the meeting held in New York in September 2008 and in the bilateral communications with the team, have been fundamental for strengthening the project. We would like to thank Cecilia Ugaz, Deputy Resident Rep- resentative of the UNDP in Argentina, for her collaboration in preparing the Executive Summary and UNDP Argentina for offering the Report team their support. We would also like to express our gratitude to the many colleagues who offered comments throughout the process of writing the Report, especially to those who took part in the following meetings:

• Annual meetings of the UNDP Latin American Human De- velopment Network, in Santo Domingo (2007), Montevideo (2008) and Lima (2009). • Meetings of the LACEABM-BID-UNDP Inequality and Poverty Network, in Bogota (2007), Santo Domingo (2008) and Lima (2009).

8 Executive Summary • Annual meetings of the Human Development and Capabilities • Consultation meeting with the Human Development Report Association (HDCA), in Montevideo (2008) and Lima (2009). Office Team, New York, June2010 . • Annual meetings of the Latin American and the Caribbean • Taxation and Social Cohesion in Latin America Forum, organised Economic Association (LACEA), in Río de Janeiro (2008) by EUROSociAL Fiscalidad in the Institute for Fiscal Studies, and Buenos Aires (2009). Madrid, Spain, 7 to 9 June 2010. • Conference on the Intra- and Intergenerational Transmission of • FIIAPP-AECID meeting in Cartagena de Indias, Colombia, Inequality, held at El Colegio de México, Mexico City (2008). June 2010. • UNDP RBLAC season of seminars in New York. • El Colegio de México’s Centre for Economic Studies season of We would like to thank the following individuals for their very seminars in Mexico City. useful contributions: Sabina Alkire, Irma Arriagada, Kaushik • Workshop on Inequality and Human Development Measure- Basu, Jere R. Behrman, Francois Bourguignon, Rebeca Centeno, ment. Vanderbilt University, 23 and 24 January 2009. Marcelo Delajara, Severine Deneulin, Francisco Ferreira, James • Consultation meeting with the Report Team on the Human E. Foster, Gary Fields, Garance Genicot, Ravi Kanbur, Debraj Ray, Development of Nicaragua, Managua, 31 March 2009. María de la Paz López, David Mayer-Foulkes, Mónica Orozco, • 3 rd OECD World Forum on Statistics, Knowledge and Policy Harry Patrinos, Jean Philippe Platteau, Gloria Rubio, Jaime OECD: The Future of Human Development Measures, Busan, Saavedra, Emma Samman, María Emma Santos, Patricio Solís, South Korea, 27 October 2009. Miguel Urquiola and Florencia Torche. • Consultation meetings with the Executive Committee, Techni- And special thanks to the authorities and colleagues at El cal Committee and the Communications Team of the UNDP Colegio de México for their continuous support. offices in: Finally, the Report team would like to thank everyone who · Mexico and Central America, held in Mexico City, Mexico, took part, directly or indirectly, in drafting this Report, and accepts 18 and 19 January 2010. full and total responsibility for any errors or omissions. · Southern Cone, held in Buenos Aires, Argentina, 25 and 26 January 2010. · Andean Area, held in Quito, Ecuador, 1 and 2 February 2010. · Caribbean Area, held in Kingston, Jamaica, 4 and 5 Febru- ary 2010. • Consultation meeting with the RBLAC Regional Service Centre, Panama City, Panama, 3 February 2010. • 2 nd Latin American Social Sciences Meeting, FLACSO, Mexico City, June 2010.

Regional Human Development Report for Latin America and the Caribbean 2010 9 Regional Human Development Report Chapter 1 for Latin America and the Caribbean 2010 Conceptual framework of the Report Inequality of what? Acting on the future: breaking Opportunities, capabilities and inequality the intergenerational transmission of inequality It is possible to reduce inequality in Latin America and the Caribbean Towards a public policy approach based on the findings of this Report

Chapter 2 Inequality in Latin America and the Caribbean Human development with persisting inequality The tyranny of averages The HDI and inequality Unequal today, unequal tomorrow. Why has inequality remained unchecked? Breaking the inertia of inequality

Chapter 3 The transmission of achievements at the household level: binding constraints Households and context Early investment in human capital Binding constraints: the effect of inequality on investment in human development Crisis, vulnerability and protecting achievements in human development Three possible levels for focusing public policy: households, the provision of services or both

10 Executive Summary Chapter 4 Chapter 6 Process matters: the role of aspirations Acting on the future: breaking the intergenerational and autonomy in transmitting inequality transmission of inequality What cannot be seen also matters Inequality, human development and public policy Aspirations: gaps, individual effort, The message: Yes, it is possible to reduce inequality in LAC connected societies and stratified societies Recent achievements: social policy during the last two decades Agency and autonomy From fighting poverty to reducing inequality: Stratification throughout LAC beyond CCT programmes Stratification of educational aspirations The path ahead The path towards connected societies Bibliography Chapter 5 Technical Notes From the household to an ideal community: the political Appendix economy underpinning the persistence of inequality Statistical appendix The systemic inequality trap The democratic political system and its complex relationship with inequality Why is the regulatory capacity of LAC states failing? The difficulty of representing the interests of all Towards a virtuous circle: households, political participation and the reduction of inequality

Regional Human Development Report for Latin America and the Caribbean 2010 11

Executive Summary

Acting on the future: breaking the intergenerational transmission of inequality In terms of equality, Latin America and the Caribbean (LAC) to achieve certain objectives, such as securing a university ranks last on the worldwide stage, with inequality being one of qualification or landing a well-paid job. This tends to lead the main hurdles to overcome on the path to improving human to a situation whereby different social groups continue to development. This Report contains an in-depth analysis of the report different levels of achievement (Chapter 4 of the various mechanisms that affect the intergenerational transmis- Report). sion and persistence of inequality throughout the region. The main message of this Report is that inequality in Latin 4. Nevertheless, the causes underpinning the persistence of America can be curbed, if the vicious circle that propagates the inequality are not confined solely to within the household. intergenerational transmission of inequality is broken. The There are other obstacles preventing public policies from principal findings of the Report are as follows: bridging the gaps and combating heterogeneous levels of achievement in terms of well-being. This can be put 1. Inequality observed in income, education, life expectancy down to the fact that the political process also responds and other indicators persists from one generation to the differently to different needs, depending on the group next and is also associated with a context of low social and in question. Among the many political factors that affect economic mobility (Chapters 1 and 2 of the Report). the reproduction of inequality, the following should be highlighted: the poor quality of political representation, 2. This implies that there are mechanisms for reproducing the frailty of public institutions, unequal access to influ- levels of achievement from one generation to the next. ence specific policies, and institutional shortcomings that Gaining a clearer understanding of such mechanisms for lead to corruption and state capture. These systemic factors transmitting households’ achievements will facilitate the mean that the political dynamic is actually exacerbating, design of more effective policies for breaking the vicious instead of compensating, the reproduction of inequality circles through which poverty and inequality are propagated (Chapter 5 of the Report). (Chapter 3 of the Report). 5. The most widespread public policies deployed throughout 3. As with poverty, inequality is a phenomenon caused by the region tackle, often successfully, specific aspects of constraints, which, in addition to limiting access by broad the fight against poverty, but fail, however, to consider swathes of the population to basic functionings, also affect the comprehensive nature of deprivation and its systemic people’s aspirations and perceptions of their possibilities relationship with inequality.

Regional Human Development Report for Latin America and the Caribbean 2010 13 6. Combating poverty is essential. The success of this venture Lastly, there must be Reason, meaning that the beneficia- will have a positive impact on reducing inequality. That ries of these policies must have a say in their design and said, this Report contends that combating inequality per implementation, and through this sense of ownership p be se must be a core objective on politicians’ agendas and active agents of their own development. Examples of this accomplishing this feat will require specific mechanisms focus are presented in Chapter 6 of the Report. to be put in place. The underlying reasons for combating inequality are not only normative in nature. Reducing existing levels of inequality will also help to create con- Inequality of what? nected societies, which strengthen economic growth and Inequality and its visible manifestations are an undeniable social cohesion. truth for each and every citizen. The notion that inequality is unacceptable from a normative and instrumental standpoint 7. A capability-based approach to equality, meaning one that has long been the subject of debate for social scientists and seeks an equitable expansion of people’s effective freedom political thinkers. However, lingering doubts remain over the to choose between different options in life that matter type of inequality deemed relevant and, therefore, which type to them, involves a fully-comprehensive strategy that should be targeted through public action. One of the key aspects specifically tackles the pressing objective and subjective of the debate involves settling on the dimension of inequality constraints that have a more direct bearing on the most that should be measured. It is possible to speak of inequality of underprivileged groups of society. opportunities, inequality of access to possibilities “to be” and “to do”, and inequality of income, education or other indicators of 8. This Report presents a means of overcoming the limita- social achievement. Inequality also exists in terms of political tions typically associated with the traditional approach to participation and influence, among other relevant dimensions. calculating the human development index (HDI), which is The inequality observed is invariably the product of a complex based on taking a simple average of its three components. combination of factors. The Report also proposes that the inequality indicator be In order to analyse the causes of inequality, an important dis- introduced into the process of measuring levels of develop- tinction must be drawn between ex ante and ex post approaches. ment. Inequality plays no role in the traditional approach An ex ante approach places greater importance on the initial con- to measuring the combination of achievements in the ditions and underscores the need to “ensure a level playing field dimensions of income, education and life expectancy. for everyone”, without taking other factors into account. In the This Report recommends using the human development well-known metaphor, ex ante equality dictates that the runners dimensions that make up the traditional HDI, but instead in a race must start from the same point every time, instead of of simply obtaining the arithmetic mean, the dimensions starting from the positions reached in the previous race. In con- should be aggregated, with greater weight attached to trast, an ex post approach places priority on the result, effectively those indicators lagging furthest behind. Thus, the task meaning “that achievement must be the same for everyone”. An of measuring human development will also encompass ex post approach is a result of the interaction between individual the importance that a society attaches to inequality. The and contextual aspects.1 This Report adopts a notion of equality region’s level of human development drops by a startling based on the capabilities dimension, an approach from the ex 6% to 19% on average when inequality is incorporated into ante school but which also requires equality to be present in the the HDI measurement process. process through which people choose their paths in life. The human development focus is rooted in the concept of 9. The Report favours the Three R’s of Reform approach, in capabilities (Sen, 1985). Within this conceptual framework, ca- reference to the concepts of Reach, Range and Reason. This pabilities are the set of options between which individuals can approach argues that policies geared toward redistribution choose. However, this approach also underscores the importance must have Reach, meaning they must be effective at reach- of functionings, meaning that which an individual manages “to ing the target groups they were originally intended for (this be” or “to do” at various stages of his or her life.2 Functionings includes effective universal coverage of a basic set of public 1 An ex ante approach is consistent with the idea of “equity”, while “equality” is associated services and social protection). In turn, these policies must with an ex post vision. 2 It is of crucial importance that capabilities represent a set of available options which, to have Range and be comprehensive, meaning that they be effectively available, require certain conditions to access resources and services and must appreciate that there are multiple constraints facing also the possibility to effectively transform the options into functionings. Capabilities are not specific skills or functionings. As explained below, the task of exploring these households and that these often thrive off one another. notions from an empirical standpoint poses a number of significant challenges.

14 Executive Summary not only encompass basic issues, such as the possibility of en- and services. Second, are the characteristics of these goods and joying a long and healthy life, or of acquiring individually and services. Third are binding constraints, which are determined by socially valuable knowledge, but also refer to more complex the connections between the initial conditions of each household issues, particularly from the standpoint of public policies, such (the socioeconomic characteristics of the domestic unit into as gaining self-respect, fitting in socially and taking part in which an individual is born) and the supply of effectively available political processes.3 goods and services. Binding constraints either allow or prevent The capabilities approach in its original guise arose from a individuals from transforming access to goods and services into discussion on the dimension through which equality should be achievements, such as enjoying a long and healthy life, or ac- measured (Sen, 1980), and followed the belief that this phenom- cessing individually or socially valuable knowledge, among other enon must be measured through the capabilities dimension (and functionings. Fourth, are all those functionings that are effectively the associated functionings). Under this approach, development available for individuals (capabilities). By utilizing this capability can be viewed as a process of expanding people’s real options to approach to equality, this Report analyses inequality in terms of choose between alternate paths in life. Accordingly, development human development, the ties or links that make it persist from is an expansion of freedom (Sen, 1999), and the set of available one generation to the next and the conditions needed to ensure options in life for a given person is the measure of his or her that public policies manage to break the dynamic that leads to effective freedom. the reproduction of inequality. The notion of equality of capabilities requires, as a condition precedent, the existence of equal opportunities, yet it is a much broader concept than the latter, as it also requires equality to be It is possible to reduce inequality in Latin America present in the process through which well-being is achieved. and the Caribbean In accordance with this approach, there are various factors Inequality in Latin America and the Caribbean (LAC) has three explaining inequality, including not only individual aspects but defining features: it has high rates of occurrence, it is persistent also the context in which people’s lives unfold (see Figure 1). and it reproduces itself within a context of low social and economic First among these are the conditions determining access to goods mobility. Although it is true that a drop in income inequality was reported at the start of the twenty-first century in 12 of the 17 3 Some of these functionings are also reflected in the notion of primary goods, which countries analysed in recent studies, the three defining features forms part of Rawls’ theory of justice (1972). mentioned above have been historically present over various periods of growth and recession, and have survived very different Figure 1* Generation of well-being and reproduction political systems and public policy interventions (López-Calva and of inequality Lustig, 2010). Available information would indicate that the high levels of inequality have by and large been relatively immune Access, availability of Inequity in the starting to the development strategies applied in the region since the goods and services set of achievements nineteen fifties, including the market reforms experienced in the 1980s and 1990s (Klassen and Nowak-Lehmann, 2009). The unequal distribution of income throughout LAC countries Individual aspects Objective elements: Transformation function Social aspects Educational quality, has attracted a huge amount of interest over the years. Multilat- Context socioeconomic conditions, eral organizations, such as the Economic Commission for Latin employment, inequality, America and the Caribbean (ECLAC), the World Bank (WB), the poverty, discrimination, etc. Inter-American Development Bank (IDB) and the United Nations Development Programme (UNDP) have added their combined Set of available functionings (capability set) weight to the extensive academic work on the issue with a public

Lead to decisions on une- policy-oriented approach. This Report aims to extend the outlook ven sets of real freedoms, of the human development inequality analysis in LAC nations which, in the absence of in order to pinpoint the underlying factors allowing inequality interventions, reproduce Assessment function the initial inequity. to pass from one generation to the next. The main contributions that the human development-based approach brings to the process of formulating public policies * Corresponds to Figure 1.1 in the Report. stem from its indispensable multidimensional perspective when Source: HDR Team analyzing well-being, and also from the relevance of “process”

Regional Human Development Report for Latin America and the Caribbean 2010 15 in accomplishing individual and collective objectives. In par- structural and reveal the endogenous nature of inequality. As a ticular, the “process” component involves strengthening agency, result, economic reasons, together with causes associated with which can be defined as people’s capacity to influence their own the political economy explain the reproduction of inequality by plans in life.4 In effect, these two contributions underpin this generating unequal access to institutional representation and analysis of the causes of the reproduction of human develop- unequal opportunities for citizens to have their voices heard ment inequality in the region. Some causes are economic in (Sabates-Wheeler, 2008). nature and are illustrated by the high correlation between one generation’s assets, income and schooling and those of the next generation. That said, there are also other political and social The evolution of inequality in LAC causes. Associated more with historical and systemic factors, Latin America and the Caribbean reports the highest rates of in- such as the inequality of opportunities and of access to power equality worldwide in terms of per capita household income: 10 of relations, these political and social causes generate situations of the world’s 15 most inequality-rife countries belong to this region exclusion, oppression and domination. These inequalities are (UNU-WIDER, 2007). For example, income inequality in the LAC region, as measured by the Gini coefficient, is65 % higher than in

4 This concept is discussed at further length in Chapter 4. In principle, it can be illustrated high-income countries, 36% higher than the income inequality through the Roman Law concept of sui juris, which refers to one governed “by one’s observed in East Asian countries and 18% higher than that reported own laws”, as opposed to the concept of alieni juris, which refers to someone “governed by the laws of others”. for Sub-Saharan Africa (López-Calva and Lustig, 2010).

Chart 1. Latin America and the Caribbean (17 countries). Evolution of income inequality. Start of the 1990s to halfway through the 2000s (circa 2006)

Gini index in Latin America and the Caribbean 56 55.5 Mean 54.9 55 54.7 Median 54.5 Weighted mean 54 53.6 53.6 53.2 53 52.7 52.7 52.3 52.0 51.9 52 51 50 Start of the 1990s End of the 1990s Start of the 2000s Middle of the 2000s

Gini index by region 55 54.4 Southern Cone 54 53.9 53.8 53.4 Andean Region 53.0 53 52.6 52.6 Central America 52.4 52 51.8 51.3 51.1 51 50.9 50 49 Start of the 1990s End of the 1990s Start of the 2000s Middle of the 2000s

* Corresponds to Chart 2.6 in the Report. Source: Gasparini et al. (2009), based on SEDLAC (CEDLAS and World Bank, 2010).

16 Executive Summary Chart 2* Latin America and the Caribbean (23 countries). Gini index. Circa 2006

60 59.2 59.3

55.9 55.1 55.3 55.4 55 54.8 54.9 53.4 53.6 52.3 52.6 52.8 51.8 51.8 50.8 49.9 Gini Index 50 49.6 49.7 48.3 48.3

45.5 45 44.7

40 xico Peru Haiti Haiti Chile Brazil Belize Me Guyana Panama Jamaica Ecuador Uruguay State of) Republic Paraguay Suriname Colombia Honduras Argentina Venezuela Venezuela Nicaragua Costa Rica Dominican Guatemala El Salvador (Bolivarian Rep. of) Rep. (Bolivarian Bolivia (Plurinational

*Corresponds to Chart 2.7 in the Report. Source: Gasparini et al. (2009), based on SEDLAC (CEDLAS and World Bank, 2010).

Whereas inequality in Central America has followed a con- aggregate figures illustrating this progress cover up significant stant downward path since the start of the 1990s, inequality in inequalities, including territorial inequality, gender inequal- the Southern Cone and the Andean Region of South America ity, inequality among different ethnic or racial groups, and increased over the 1900s and it wasn’t until roughly 2005 that inequality pertaining to other dimensions affecting human it began to drop off significantly (Gasparini et al., 2009; López- development. Calva and Lustig, 2010; see Chart 1). Yet despite this more recent improvement, prevailing inequality in LAC nations remains very high: for example, the Gini index for Bolivia, Haiti and Brazil Territorial inequality stands at over 55 (see Chart 2).5 In addition to the visible differences in human development Inequality in the region is not only high, but also extremely among countries, different levels of inequality can be observed persistent (see Charts 3 and 4), this despite the hugely important within each country. Disaggregated estimates reveal the disad- recent advances aimed at reducing inequality, as mirrored in the vantages facing groups of the population that live in different performance of the human development index (HDI). geographic areas of the same country (see Chart 5). Over the period spanning 1990-2007, LAC countries reported gains in terms of human development, although the average annual growth rate for this particular indicator has fallen off Inequality among groups: slightly over recent years, moving from 0.8% in the 1990s to gender and origin differences 0.6% for 2000-2007 (see Table 1). Meanwhile, countries from There are unquestionable inequalities among groups, such as other regions worldwide that had reported HDI values in 2000 between people of different sex, or different racial or ethnic origin. similar to those of LAC countries have made considerably more In terms of gender, and in relation to existing opportunities for progress up to 2007 (see Table 2). generating income and accessing social security, women continue Although certain LAC countries have clearly witnessed to bring in relatively poor levels of pay in comparison to men, even advances in human development and a decline in poverty, the when both have the same level of training. In turn, prevailing rigidity within the job market makes it more likely that women

5 In the field of employment, which is vital for generating income and other satisfactors, will be confined to the informal economy and in sectors of low wage inequality is as much of a problem as income distribution: it is estimated that the productivity, chiefly services (Márquez and Prada,2007 ). hourly wage in the region reflects inequality of roughly 50.1% in accordance with the Gini index.

Regional Human Development Report for Latin America and the Caribbean 2010 17 Chart 3* Regions of the world. Gini coefficient of household per capita income. Latin America Developed 65 Asia & the Caribbean 60 countries 60 59 59 56 56 55 55 55 55 55 54 54 55 55 52 53 51 50 50 50 48 49 50 47 48 45 45 45 41 41 40 40 40 38

Gini Index 40 37 37 36 36 35 36 34 34 35 32 33 32 31 31 30 29 29 29 30 28 28 28 27 25 20 Italy Peru Haiti Chile Israel Spain Brazil Korea China Nepal France Jordan Greece Ireland Taiwan Austria Mexico Finland Canada Guyana Holland Norway Sweden Panama Ecuador Belgium Portugal Uruguay Thailand Australia Malaysia Denmark Germany Paraguay Colombia Honduras Indonesia Argentina Nicaragua Costa Rica Guatemala El Salvador Bangladesh Switzerland Luxembourg New Zealand United States The Philippines The United Kingdom (Bolivarian Rep. of) Rep. (Bolivarian (Plurinational State of) Dominican Republic Bolivia Venezuela Venezuela

Note: the Gini index considered in each case corresponds to the last year for which data is available over the period spanning 1995-2005. * Corresponds to Chart 2.1 in the Report. Source: Gasparini et al. (2009), based on SEDLAC (CEDLAS and World Bank, 2010).

Chart 4* Regions of the world. Gini coefficient Table 1* Latin America and the Caribbean. Performance of the of income. Ten-year averages for 1970, 1980 and 1990 human development index (HDI). 1990, 2000, 2007 and and average for the 1970-2000 period growth (%) over the periods 1990-2000 and 2000-2007

60 HDI HDI HDI HDI HDI HDI 50.5 Country Country 1990 2000 2007 1990 2000 2007 52.2 Growth Growth Growth Growth position position

50.8 2007 HDI 2007 HDI

48.4 Worldwide Worldwide 50 1990-2000 (%) 2000-2007 (%) 1990-2000 (%) 2000-2007 (%) 37 Barbados .. .. 0.903 n.a. n.a. 78 Peru 0.708 0.771 0.806 8.9 4.5 41.2 40.6 40.2 40.4 44 Chile 0.795 0.849 0.878 6.8 3.4 80 Ecuador 0.744 .. 0.806 n.a. n.a. 40 34.2 32.8 47 Antigua and Barbuda .. .. 0.868 n.a. n.a. 90 Dominican Republic 0.667 0.748 0.777 12.1 3.9 32.3 32.5 33.0 49 Argentina 0.804 .. 0.866 n.a. n.a. Saint Vincent 30.1 91 .. .. 0.772 n.a. n.a. Gini Index 28.3 29.3 and the Grenadines 30 50 Uruguay 0.802 0.837 0.865 4.4 3.3 93 Belize 0.705 0.735 0.772 4.3 5.0 51 Cuba .. .. 0.863 n.a. n.a. 97 Suriname .. .. 0.769 n.a. n.a. 20 52 Bahamas .. .. 0.856 n.a. n.a. 100 Jamaica .. 0.750 0.766 n.a. 2.1 53 Mexico 0.782 0.825 0.854 5.5 3.5 101 Paraguay 0.711 0.737 0.761 3.7 3.3 54 Costa Rica 0.791 0.825 0.854 4.3 3.5 10 106 El Salvador 0.660 0.704 0.747 6.7 6.1 Venezuela 58 0.790 0.802 0.844 1.5 5.2 (Bolivarian Rep. of) 112 Honduras 0.608 0.690 0.732 13.5 6.1 60 Panama 0.765 0.811 0.840 6.0 3.6 Bolivia (Plurinational 0 113 0.629 0.699 0.729 11.1 4.3 1970 - 2000 1970s 1980s 1990s 62 Saint Kitts and Nevis .. .. 0.838 n.a. n.a. State of) Ten-year averages 64 Trinidad and Tobago 0.796 0.806 0.837 1.3 3.8 114 Guyana .. .. 0.729 n.a. n.a. 69 Saint Lucia .. .. 0.821 n.a. n.a. 122 Guatemala 0.555 0.664 0.704 19.6 6.0 73 Dominica .. .. 0.814 n.a. n.a. 124 Nicaragua 0.573 0.667 0.699 16.4 4.8 Asia Eastern Europe 74 Granada .. .. 0.813 n.a. n.a. 149 Haiti 0.462 .. 0.532 n.a. n.a. OCDE Latin America and the Caribbean 75 Brazil 0.710 0.790 0.813 11.3 2.9 Average country growth rate 8.1 4.3 77 Colombia 0.715 0.772 0.807 8.0 4.5 Average annual country growth rate 0.8 0.6 * Corresponds to Chart 2.2 in the Report. Source: HDR Team calculations based on De Ferranti et al. (2003). n.a. Not applicable * Corresponds to Table 2.1 in the Report. Source: HDR Team calculations based on UNDP (2009a).

18 Executive Summary In all countries for which there is comparable information Eastern Europe and Africa Central Asia (CEPALSTAT, 2010), there is a greater proportion of women 59 60 60 involved in the informal sector than men (see Table 3), implying

55 54 that many women are missing out on social benefits and facing 53 greater vulnerability. This finding is particularly worrying in the 48 47 case of women in situations of poverty. Similarly, the region still

43 retains a gender division of labour that overburdens women in 41 38 terms of total time spent at work (see Box 1). 37 36 36 35 35 Inequalities associated with racial and ethnic origin also pose 32 32 33 30 significant challenges. Throughout LAC, there are a touch more

26 than 50 million indigenous people and 120 million people of 25 26 24 25 African descent, representing roughly 33% of the total population for the region. A comparison of the progress made towards the millennium development goals (MDGs) 6 by the population Latvia Poland Estonia Belarus Croacia Uganda Ethiopia Slovakia Bulgaria Slovenia Hungary Romania Lithuania Moldavia Tajikistan Botswana

Cameroon of European descent (PED) as opposed to that of indigenous Uzbekistan Kazakhstan South Africa South Madagascar Turkmenistan

Czech Republic peoples and Afro-descendants (IPAD), shows that there are

Russian Federation still gaps between both groups (Busso, Cicowiez and Gasparini, 2005).7 For example, the poverty levels of IPAD are manifestly higher than those for PED, with the exception of Costa Rica and Haiti (see Chart 6).

Macedonia (former Yugoslav Republic of) Republic Yugoslav (former Macedonia This difference can be put down to a range of different factors, one of which relates to the benefits that each group obtains from formal education. Factors such as per capita income, the parents’ Table 1* Latin America and the Caribbean. Performance of the levels of educational achievement, the size of the household human development index (HDI). 1990, 2000, 2007 and and place of abode would seem to give rise to greater levels of growth (%) over the periods 1990-2000 and 2000-2007 schooling among PED in comparison to IPAD.8 Moreover, different levels of schooling, gender inequality HDI HDI HDI HDI HDI HDI Country Country and different returns to experience are all factors that influ- 1990 2000 2007 1990 2000 2007 Growth Growth Growth Growth Growth position position 2007 HDI 2007 HDI ence poverty among IPAD. Table 4 illustrates the change in the Worldwide Worldwide Worldwide 1990-2000 (%) 2000-2007 (%) 1990-2000 (%) 2000-2007 (%) poverty levels of IPAD that would occur in different countries 37 Barbados .. .. 0.903 n.a. n.a. 78 Peru 0.708 0.771 0.806 8.9 4.5 if this group of the population had the same characteristics as 44 Chile 0.795 0.849 0.878 6.8 3.4 80 Ecuador 0.744 .. 0.806 n.a. n.a. PED in various fields. For example, it can be seen how poverty 47 Antigua and Barbuda .. .. 0.868 n.a. n.a. 90 Dominican Republic 0.667 0.748 0.777 12.1 3.9 in Ecuador would fall by 43.6% if IPAD had the same returns 49 Argentina 0.804 .. 0.866 n.a. n.a. Saint Vincent 91 .. .. 0.772 n.a. n.a. and the Grenadines on education as PED. With the exception of Chile, Costa Rica, 50 Uruguay 0.802 0.837 0.865 4.4 3.3 93 Belize 0.705 0.735 0.772 4.3 5.0 Panama and Paraguay, returns on education in other LAC coun- 51 Cuba .. .. 0.863 n.a. n.a. 97 Suriname .. .. 0.769 n.a. n.a. tries are lower among IPAD. 52 Bahamas .. .. 0.856 n.a. n.a. 100 Jamaica .. 0.750 0.766 n.a. 2.1 53 Mexico 0.782 0.825 0.854 5.5 3.5 101 Paraguay 0.711 0.737 0.761 3.7 3.3 6 During the Millennium Summit held in September 2000, the leaders of numerous 54 Costa Rica 0.791 0.825 0.854 4.3 3.5 countries worldwide ratified the Millennium Declaration, containing the Millennium 106 El Salvador 0.660 0.704 0.747 6.7 6.1 Venezuela Development Goals (MDGs), which were designed to forge a fairer and more equitable 58 0.790 0.802 0.844 1.5 5.2 (Bolivarian Rep. of) 112 Honduras 0.608 0.690 0.732 13.5 6.1 world by 2015. The MDGs include various goals relating to the fight against poverty, hunger and the incidence of illnesses affecting millions of people worldwide. 60 Panama 0.765 0.811 0.840 6.0 3.6 Bolivia (Plurinational 7 The differentiation between PED and IPAD as comparable groups of the population is 113 0.629 0.699 0.729 11.1 4.3 State of) intended purely for analytical purposes. In reality, it simplifies the huge diversity present 62 Saint Kitts and Nevis .. .. 0.838 n.a. n.a. in each group and ignores the quantitively lower presence of other groups of people 64 Trinidad and Tobago 0.796 0.806 0.837 1.3 3.8 114 Guyana .. .. 0.729 n.a. n.a. within the region. For a more detailed discussion of this subject and an exhaustive justification of this analytical distinction, please refer to Busso, Cicowiez and Gasparini 69 Saint Lucia .. .. 0.821 n.a. n.a. 122 Guatemala 0.555 0.664 0.704 19.6 6.0 (2005). 124 Nicaragua 0.573 0.667 0.699 16.4 4.8 8 See the Human Development Report Brazil 2005, which contains an in-depth analysis 73 Dominica .. .. 0.814 n.a. n.a. of the racial inequalities in indicators such as income, education, life expectancy, 74 Granada .. .. 0.813 n.a. n.a. 149 Haiti 0.462 .. 0.532 n.a. n.a. employment, housing and violence, all disaggregated by municipality, and concludes that the population of African descent is at a relative disadvantage, according to all 75 Brazil 0.710 0.790 0.813 11.3 2.9 Average country growth rate 8.1 4.3 the indicators analysed. In order to complement the universally-applicable policies, the same report suggests implementing affirmative action policies, which are thought to 77 Colombia 0.715 0.772 0.807 8.0 4.5 Average annual country growth rate 0.8 0.6 provide a massive advantage at mitigating the inequalities facing people of African descent (UNDP, 2005). n.a. Not applicable * Corresponds to Table 2.1 in the Report. Source: HDR Team calculations based on UNDP (2009a).

Regional Human Development Report for Latin America and the Caribbean 2010 19 Table 2* Latin America and the Caribbean (19 countries) in a worldwide context (26 countries). Human development index (HDI). 2000, 2007 and growth (%) over the period 2000-2007

Global Country HDI Growth Global Country HDI Growth position HDI 2000-2007 position HDI 2000-2007 2000 2000 2007 (%) 2000 2000 2007 (%) 32 Poland 0.853 0.880 3.2 58 Colombia 0.772 0.807 4.5 33 Chile 0.849 0.878 3.4 59 Peru 0.771 0.806 4.5 34 United Arab Emirates 0.848 0.903 6.6 60 Mauritius 0.770 0.804 4.5 37 Slovakia 0.840 0.880 4.7 64 Thailand 0.753 0.783 4.0 38 Uruguay 0.837 0.865 3.3 65 Jamaica 0.750 0.766 2.1 39 Croacia 0.837 0.871 4.1 66 Dominican Republic 0.748 0.777 3.8 40 Estonia 0.835 0.883 5.8 67 Kazakhstan 0.747 0.804 7.6 41 Lithuania 0.830 0.870 4.9 71 Iran (Islamic Republic of) 0.738 0.782 6.0 42 Costa Rica 0.825 0.854 3.5 43 Mexico 0.825 0.854 3.6 72 Paraguay 0.737 0.761 3.2 44 Libyan Arab Jamahiriya 0.821 0.847 3.1 73 Gabon 0.735 0.755 2.7 45 Montenegro 0.815 0.834 2.4 74 Belize 0.735 0.772 5.0 46 Panama 0.811 0.840 3.6 75 Maldives 0.730 0.771 5.6 47 Latvia 0.810 0.866 7.0 80 Algeria 0.713 0.754 5.7 48 Trinidad and Tobago 0.806 0.837 3.8 81 El Salvador 0.704 0.747 6.1 49 Bulgaria 0.803 0.840 4.6 Bolivia (Plurinational 82 0.699 0.729 4.4 State of) Venezuela (Bolivarian 50 0.802 0.844 5.3 Rep. of) 83 Jordan 0.691 0.770 11.5

Macedonia (former 84 Honduras 0.690 0.732 6.0 51 0.800 0.817 2.1 Yugoslav Republic of) 85 Vietnam 0.690 0.725 5.1 53 Serbia 0.797 0.826 3.7 93 Indonesia 0.673 0.734 9.1 54 Brazil 0.790 0.813 2.9 94 Nicaragua 0.667 0.699 4.8 55 Romania 0.788 0.837 6.3 95 Egypt 0.665 0.703 5.8 57 Albania 0.784 0.818 4.4 96 Guatemala 0.664 0.704 6.1 97 Vanuatu 0.663 0.693 4.5

* Corresponds to Table 2.2 in the Report. Source: HDR Team calculations based on UNDP (2009a)

The significant differences in development among these Inequality in the dimensions that affect groups of the population are due to a huge variety of factors. human development A large proportion of the indigenous population, for example, A further aspect of the inequality plaguing the region is apparent lives in rural areas that have limited access to basic infrastructure, in people’s access to basic services and infrastructure.9 education and healthcare services. Market segregation, intrinsically In terms of access to infrastructure services, and despite the related to this phenomenon, tends to push the indigenous popula- situation in countries such as Chile and Costa Rica, where the tion to sectors of low productivity, which, as a general rule, do not difference between the 20% of the population with the greatest offer even basic social security benefits. In a significant sample of income and the 20% with the lowest income is relatively low, LAC countries, more than one third of the occupied indigenous countries such as Peru, Bolivia and Guatemala offer poor cover- population works in the primary sector. In Honduras and Paraguay, age of such services, coupled with gaping breaches between the for example, this proportion stands at roughly 75% (see Table 5). two aforementioned groups (see Chart 7). As regards to access to adequate housing and basic services, over the period spanning 1995-2005, the difference in the use

9 The first part of this section is based primarily on Gasparini et al. (2009).

20 Executive Summary Chart 5*. Latin America and the Caribbean (10 to 12 countries). Maximum, average and minimum values of the human development index (HDI), of its components and of the gender-related development index (GDI) by geographic units in each country. Circa 2006

HDI Education Index 1 1 0.9 0.9 0.8 0.8 0.7 0.7 0.6 0.6 0.5 0.5 HDI 0.4 0.4

0.3 Education Index 0.3 0.2 0.2 0.1 0.1 0 0 Peru Peru Brazil Brazil Bolivia Bolivia Mexico Mexico Panama Panama Uruguay Uruguay Paraguay Paraguay Colombia Colombia Argentina Argentina Costa Rica Costa Rica Guatemala Guatemala El Salvador El Salvador (Plurinational State of) (Plurinational State of) Health Index Income Index 1 1 0.9 0.9 0.8 0.8 0.7 0.7 0.6 0.6 0.5 0.5 0.4 0.4 Health Index 0.3 Income Index 0.3 0.2 0.2 0.1 0.1 0 0 Peru Peru Brazil Brazil Bolivia Bolivia Mexico Mexico Panama Panama Uruguay Uruguay Paraguay Paraguay Colombia Colombia Argentina Argentina Costa Rica Costa Rica Guatemala Guatemala El Salvador El Salvador (Plurinational State of) (Plurinational State of) DGI 1 0.9 0.8 Note: The charts depict how the levels of each index are distributed for the geographic 0.7 units that make up each country (for example, states, provinces or departments). 0.6 The lines represent the classification of all these levels, from highest to lowest, 0.5 while the points indicate the average value of the index in each case. A longer DGI line points to greater heterogeneity in the distribution of attainment between 0.4 the geographic units of a given country, whereas a shorter line reveals a 0.3 more homogenous distribution of attainment among such units. Given the 0.2 heterogeneity in the definitions of the geographic units, which depend on the context of each country, the information does not allow for comparisons between 0.1 them and only illustrates the internal dispersion of the values considered in 0 each of the countries. * Corresponds to Chart 2.3 in the Report.

Peru Source: Estimates reached by the different agencies of the United Nations Development Brazil Bolivia Mexico Panama

Uruguay Programme (UNDP) in each country, whether operating on a state, provincial Paraguay Colombia Argentina Costa Rica Guatemala El Salvador or departmental level. The methodology applied in certain cases differs from that established by the UNDP (1990). (Plurinational State of)

Regional Human Development Report for Latin America and the Caribbean 2010 21 Table 3* Latin America and the Caribbean (15 countries). Box 1* Use of time: Employment in the informal economy in urban areas by The double burden for women sex. 1999 and 2008 (%)

1999 2008 Gender equality and the empowerment of women, one of the eight objectives of the Millennium Development Goals (MDGs) as enshrined in the United Nations Millennium Declaration, which Country Total Total Men Men

Women Women was ratified in New York in 2000, are important in themselves and are key to accomplishing the remaining MDGs (United Nations, Argentina 42.4 39.5 42.6 ...... 2000; PAHO, 2005; Gómez Gómez, 2008). Bolivia According to the findings of the Task Force on Education, a a a (Plurinational 64.2 55.5 75.3 62.5 57.7 71.6 Gender Equality and the Empowerment of Women, which forms State of) part of the UN Millennium Development Project, gender equality Brazil 47.4 43.8 52.6 42.0 37.8 47.4 and women’s empowerment is an objective that includes three Chile 31.8 b 27.2 b 39.2 b ...... core dimensions: i) human abilities, such as education and life Costa Rica 41.6 39.5 45.0 37.1 33.9 41.4 expectancy; ii) opportunities to use or apply these abilities by Ecuador 58.9 55.0 65.2 57.4 53.0 63.6 accessing economic and political resources; and iii) security, which refers to the necessary step of making women less vulnerable to El Salvador 52.3 45.7 59.7 ...... violence. Nevertheless, and as postulated by Gómez Gómez (2008), Honduras 55.2 52.4 58.5 43.9 a 45.4 a 41.9 a although these three dimensions are interrelated, changes in Mexico ...... 43.7 40.0 49.1 one dimension will not guarantee changes in the other two. For Panama 34.2 32.3 37.0 35.9 33.5 39.3 this reason, the task of bringing about gender equality requires Paraguay 59.2 51.9 69.2 56.5 50.1 65.4 coordinated action on all three fronts, and the “empowerment” Peru 64.1 58.7 71.1 59.3 52.9 67.1 or self-determination of women can only be achieved by making changes in all three dimensions. In order to ensure their empower- Dominican ...... 50.1 51.9 47.1 Republic ment, women need to reach equality not only in terms of skills and opportunities, but also in terms of their agency to harness Uruguay 41.5 38.6 45.4 42.8 38.2 48.5 such skills and exercise their rights. Venezuela c c c Recent studies point out that “the key issue for gender in- (Bolivarian 53.8 54.6 52.2 49.8 51.8 46.7 Republic of) equality […] is the division of work according to gender, in that Note: the table reflects the population occupied in the informal economy as a percentage of men have traditionally been assigned to carry out paid work, and the total population occupied in urban areas women unpaid work” (Gómez Gómez, 2008).1 Thus, the chances a Figures available for 2007 b Figures available for 2000 of women performing paid work is hampered by the fact that it c Figures refer to the national total is traditionally women who take care of unpaid housework. For this reason, analysing gender inequalities in terms of the use of * Corresponds to Table 2.4 in the Report. Source: CEPALSTAT (2010) time is a crucial tool for framing public policies that affect family life by helping to reconcile paid and unpaid work in which both men and women participate. Even though most households in Latin America and the Ca- ribbean (LAC) follow the traditional model whereby the man is the “bread winner”, while the woman acts as “housewife”, figures reveal the increasing role women are playing in work outside the home. In Chile, for example, roughly 45% of women aged 15 or over and living in urban areas are active in the job market, whereas in Peru 62% of women from the same group are involved in paid work or are seeking paid work (see Chart 1).

1 For further reading on this subject, see the aforementioned study by Gómez Gómez (2008), as well as Pedrero (2005), Aguirre, García and Carrasco (2005), Arriagada (2004) and, in particular, ILO-UNDP (2009).

* Corresponds to Box 2.3 in the Report.

22 Executive Summary That said, and since the growing involvement of women in paid it difficult to calculate the economic contribution of those (mostly work has not been accompanied by an equivalent upswing in the women) who carry out this kind of work. Thus, women’s contribution participation of men in unpaid domestic tasks, the workload of wo- to the economy has yet to be effectively recognized. men has been effectively multiplied (Arriagada, 2004). As a result, if These asymmetries in the distribution and in the valuation of the total workload for both men and women is analysed, i.e., if the each kind of work have adverse effects on gender equality and the time spent on both domestic tasks and on paid work is added up, it empowerment of women, and at the same time reduce the visibility becomes apparent that women are at a distinct disadvantage. As can and perceived importance of their interests in the development of be seen in Chart 2, the total hours worked by women is invariably public policies (Gómez Gómez, 2008). It will be very difficult to bring greater than the total hours worked by men. Moreover, the fact about any real improvement in social equality until a more profound that no monetary value is attached to unpaid domestic work makes cultural transformation at the family level has been achieved.

Latin America and the Caribbean (18 countries). Economically active population as a percentage of the urban population over 15, by gender. Circa 2008 (%). 80 Men 71 69 70 68 68 Women 65 65 65 66 65 64 64 63 63 62 62 62 62 60 59 60 57 57 55 55 55 54 52 52 51 51 51 50 50 50 50 48 47 45 40 Percentage

0 - Peru Chile Brazil Mexico Panama Ecuador Uruguay Republic Paraguay Colombia Honduras Argentina Nicaragua Venezuela Venezuela Costa Rica Dominican Guatemala El Salvador tional State of) Bolivia (Plurina (Bolivarian Rep. of) Rep. (Bolivarian Source: CEPALSTAT (2010).

Regional Human Development Report for Latin America and the Caribbean 2010 23 Box 1 (continuación)

Chart* 2. Latin America and the Caribbean (10 countries). Use of time: total workload by gender. Various years.

14 13 6.0 5.7 12 11 2.7 4.9 3.1 5.4 5.2 1.7 3.4 10 3.0 9 7.9 5.4 2.2 2.2 9.1 1.0 9.1 8 0.9 1.6 8.7 2.4 7.8 7.8 7.8 3.9 8.0 7 7.6 1.3 7.5 7.6 7.0 7.2 6 6.7 6.0 5 5.5 5.6 5.7 4 4.1 3.7

Average hours/day Average 3 2 1 1.8 0 Men Men Men Women Men Women Men Women Men Women Men Women Men Women Men Women Men Women Women Women

Guatemala El Salvador Mexico Costa Rica Uruguay Ecuador Nicaragua Cuba Chile Argentina

Unpaid work Paid work

Note: the indicator refers to the average time (hours per day) dedicated to paid and unpaid work. Chile (2008): the information refers to those persons aged over 15 from the region of Gran Santiago who carry out both kinds of work. Ecuador (2005): the information refers to those persons aged over 12 from the region of Quito who carry out both kinds of work. Costa Rica (2004): the information refers to those persons aged over 12 who carry out both kinds of work within the national total. Cuba (2001): the information refers to those persons aged over 15 from the region of Habana Vieja, regardless of whether they carry out both kinds of work. Uruguay (2007): the information refers to those persons aged over 14 from the national total, regardless of whether they carry out both kinds of work. Mexico (2002): the information refers to those persons aged over 12 from the national average who carry out both kinds of work. Argentina (2005): unpaid work does not encompass community work. The information refers to those persons aged between 15 and 74 from the city of Buenos Aires, regardless of whether they carry out both kinds of work. Nicaragua (1999): unpaid work does not encompass community work. The information refers to heads of household within the national total, regardless of whether they carry out both kinds of work. El Salvador (2005): the information refers to those persons aged over 12 within the national total, regardless of whether they carry out both kinds of work. Guatemala (2000): unpaid work does not encompass community work. The information refers to those persons aged over 12 within the national average, regardless of whether they carry out both kinds of work. Source: HDR Team research based on Aguilar and Espinoza (2004), CONAMU (2006), General Department for Statistics and Census of the Government of Buenos Aires (2005), Gammage (2009), INE Chile (2008), INEC Costa Rica (2008), ONE Cuba (2001), Pedrero (2005), UNDP (2008a) and UDELAR and INE Uruguay (2008).

Source: HDR Team research based on Aguirre, García and Carrasco (2005), Araya (2003), Arriagada (2004), Milosavljevic (2007), ILO-UNDP (2009), Pedrero (2005), UN Millennium Development Project (2005).

* Corresponds to Box 2.3 in the Report.

24 Executive Summary Chart 6* Latin America and the Caribbean (15 countries). Poverty (less than one dollar/day) among the population of European descent (PED) and indigenous peoples and Afro-descendants (IPAD). Circa 2000 (%)

70 Less than one dollar/day. PED 61.0 60 Less than one dollar/day. PIAD 54.7 51.7 50.9 50

40.9 40 37.1 35.0 35.5 31.5 29.0 Percentage 30 26.1 26.9 24.1 20.9 20 17.3 16.6 15.2 14.7 14.6 15.0 11.4 12.3 10.6 9.3 10 9.4 5.0 4.9 5.1 3.4 2.2 0 Peru Haiti Chile Brazil Mexico Panama Ecuador State of) Paraguay Suriname Colombia Honduras Nicaragua Costa Rica Guatemala

* Corresponds with Chart 2.5 in the Report. Bolivia (Plurinational Source: Busso, Cicowiez y Gasparini (2005).

Table 4* Latin America and the Caribbean (12 countries). Break-down of the difference in the incidence of poverty among ethnic groups. Various years

Poverty level Change in poverty Poverty level of Change in poverty Incidence Incidence of IPAD if IPAD levels if the IPAD if the labor levels if the labor of poverty of poverty schooling IPAD schooling Country Year performance of IPAD performance of on the PED on the IPAD performance performance were were equal to that IPAD were equal to population population were equal to equal to that of of PED that of PED that of PED PED (a) (b) (c) (d) = (c) - (b) (e) (f) = (e) - (b) Bolivia (Plurinational 2002 34.0 57.9 39.4 -18.4 59.6 1.7 State of) Brazil 2002 11.2 25.6 24.8 -0.8 22.1 -3.5 Chile 2000 7.5 20.3 24.5 4.2 17.9 -2.4 Colombia 1999 22.7 34.7 32.7 -2.0 32.4 -2.4 Costa Rica 2001 11.6 12.8 14.3 1.5 11.6 -1.2 Ecuador 1998 55.7 82.1 38.6 -43.6 73.1 -9.1 Guatemala 2002 20.7 50.3 47.1 -3.2 50.7 0.4 Honduras 2003 34.2 60.4 60.3 -0.2 72.7 12.3 Mexico 2002 24.4 72.0 50.6 -21.4 70.7 -1.2 Panama 2002 23.6 80.8 87.5 6.6 57.3 -23.5 Paraguay 2001 8.8 36.7 39.1 2.4 30.7 -6.0 Peru 2001 31.1 46.6 43.4 -3.2 46.0 -0.5 Note: Household per capita income. Poverty threshold: two dollars adjusted at purchasing power parity (PPP). The figures included in columns (c) and (e) have been obtained from simulations that entail assigning the IPAD certain characteristics of PED. The difference between columns (c) and (e) and column (b) can therefore be interpreted as the impact that a change in labor experience and schooling performance would have on IPAD poverty.

* Corresponds to Table 2.5 in the Report. Source: HDR Team calculations based on Busso, Cicowiez and Gasparini (2005)

Regional Human Development Report for Latin America and the Caribbean 2010 25 Table 5* Latin America and the Caribbean (11 countries). Employment by sector (%) Primary sector Secondary sector Tertiary sector Country Indigenous Non-indigenous Indigenous Non-indigenous Indigenous Non-indigenous Bolivia (Plurinational State of) 37.6 19.1 19.8 20.9 42.6 60.1 Brazil 33.4 18.0 18.0 21.7 48.6 60.3 Chile 20.3 10.3 22.6 22.0 57.1 67.7 Costa Rica 58.8 18.6 12.5 24.9 28.7 56.5 Ecuador 62.3 26.8 14.3 19.2 23.5 54.1 Guatemala 56.0 31.2 18.5 23.0 25.6 45.8 Honduras 74.0 39.4 9.2 22.0 16.8 38.6 Mexico 50.4 13.5 20.9 29.4 28.7 57.1 Panama 68.9 16.0 7.4 19.1 23.7 64.9 Paraguay 77.9 27.0 13.7 18.9 8.5 54.1 Venezuela (Bolivarian Republic of) 32.8 10.0 19.9 19.9 47.3 70.2 Nota: refers to the population aged 15 or over * Corresponds to Table 2.6 in the Report. Source: CELADE (2010

Chart 7* Latin America and the Caribbean (18 countries). Indicators of housing quality and access to basic services. Difference between the highest and lowest income quintiles. Circa 2006

Access to water (%) Access to electricity (%)

60 57 52 70 64 58 50 45 60 55 41 50 50 39 37 50 40 34 41 30 40 30 29 24 23 30 20 19 17 15 20 13 10 10 5 4 9 8 6 4 2 10 3 3 1 1 0 0 Peru Peru Chile Chile Brazil Brazil Mexico Mexico Panama Panama Ecuador Ecuador Uruguay Uruguay Paraguay Paraguay Colombia Colombia Honduras Honduras Argentina Argentina Nicaragua Nicaragua Costa Rica Costa Rica Guatemala Guatemala El Salvador El Salvador Bolivarian Rep. of) Rep. Bolivarian Dominican Rep. Bolivarian Rep. of) Rep. Bolivarian (Plurinational State of) (Plurinational State of) Dominican Republic Bolivia Venezuela ( Venezuela Bolivia Venezuela ( Venezuela

Persons per room Homes built of low quality materials (%) (Bolivarian Rep. of) Rep. (Bolivarian of) Rep. (Bolivarian (Plurinational State of) (Plurinational State of)

0.0 Guatemala Nicaragua El Salvador Panama Paraguay Peru Honduras Argentina Colombia Venezuela Uruguay Ecuador Bolivia Dominican Rep. Mexico Chile Brazil Costa Rica 0.0 Guatemala Bolivia Paraguay Ecuador El Salvador Dominican Rep. Panama Honduras Colombia Nicaragua Mexico Venezuela Peru Chile Costa Rica Argentina Brazil Uruguay -0.5 -10 -20 -1.0 -30 -1.5 -40 -2.0 -50 -2.5 -60 -3.0 -70 -80 -69 -67 -43 -41 -41 -34 -27 -25 -25 -24 -20 -15 -15 -14 -8 -7 -7 -3.5 -3.0 -2.4 -2.3 -1.8 -1.7 -1.4 -1.4 -1.4 -1.1 -1.1 -1.0 -0.9 -0.8 -0.7 -0.7 -0.6 -0.5 -0.4

Note: the chart showcases the differences in access to basic services and housing quality as reported between the 20% of the population with the highest income and the 20% with the lowest income. The differences are expressed as percentages, except for the chart referring to the number of persons per room. * Corresponds to Chart 2.8 in the Report. Source: Gasparini et al. (2009), based on SEDLAC (CEDLAS and World Bank, 2010).

26 Executive Summary Chart 8* Latin America and the Caribbean (16 countries). Indicators for housing quality and access to basic services. Changes in the difference between the highest and lowest income quintiles, early or mid 1990s to mid 2000s (%)

Homes built from low quality materials

15 15 10 5 3 Mexico 1992-2006 Chile 1 990-2006 Dominican Rep. 2000-2006 Ecuador 1995-2006 1 Paraguay 995-2006 El Salvador 1991-2005 Brazil 1992-2006 Colombia 1996-2003 Honduras 1992-2006 1 1 0 0 -2 -5 Peru -6 Argentina

-10 Nicaragua -10 1997-2006 1993-2005 1992-2006 -15 -13 -13 -16 -18

-20 State of) 1997-2005 Bolivia (Plurinational -25 -26 -30 Access to water 1997-2005

3 5 2 2 Paraguay Paraguay 1995-2006 Brazil 1992-2006 Mexico 1992-2006 Chile 1990-2006 El Salvador 1991-2005 Colombia 1996-2003 Bolivia (Plurinational State of) Peru 1997-2006 Uruguay 1992-2005 Argentina 1992-2006 Guatemala 2000-2006 Dominican Rep. 2000-2006 Honduras 1992-2006 0 0 0 0 -2 -5 -4

-8 -8 Ecuador -10 Nicaragua

-9 1995-2006 1993-2005 -11 -10 -15 Rep. of) 1992-2005 Rep.

-20 (Bolivarian Venezuela -22 -25 -25 -30 -29 Access to electricity

6 7 5 Paraguay Paraguay 1995-2006 Ecuador 1992-2006 Brazil 1992-2006 El Salvador 1991-2005 Mexico 1992-2006 Peru 1997-2006 Dominican Rep. 2000-2006 Chile 1990-2006 Uruguay 1992-2005 Colombia 1996-2003 (Bolivarian Venezuela of) 1992-2005 Rep. Argentina 1992-2006 0 1 0 0 -5 -3 -7 -5 -10 -9 Honduras Nicaragua 1993-2005 2000-2006 1992-2006 -15 -14 Guatemala -17 -20 -18 -20 -20 -19 -25 State of) 1997-2005 -30 Bolivia (Plurinational -35 -40

-45 -44

Note: The chart showcases the change (as a percent) in the differences in access to basic services as reported between the 20% of the population with the greatest income and the 20% with the lowest income * Corresponds to Chart 2.9 in the Report. Source: Gasparini et al. (2009), based on SEDLAC (CEDLAS and World Bank, 2010).

Regional Human Development Report for Latin America and the Caribbean 2010 27 of quality housing materials between the 20% of the population to almost half (Nicaragua) of their levels of human development with the greatest income and the 20% with the lowest dropped (see Chart 9). in a number of cases, with the obvious exceptions of Bolivia and, The methodology discussed above makes it possible to pin- less so, Argentina, Nicaragua and Peru. In terms of household point the exact HDI dimension that is most affected by inequality. access to drinking water, the gap between both groups increased In Nicaragua, for example, the most important type of inequal- in Ecuador, Nicaragua and Venezuela, as was also the case with ity can be found in life expectancy, whereas in Bolivia income access to electricity in Guatemala, Honduras and Bolivia (see is the most affected, while in Guatemala the key dimension is Chart 8). education (see Chart 10). The findings paint a clearer picture of the impact of inequality on the human development of certain LAC countries. In more Why does the fight against general terms, reflecting inequality in well-being indicators inequality matter? requires significant improvements to the way in which people’s living conditions are measured, monitored and assessed. As Inequality undermines advancements measurements become more accurate, policy makers will enjoy in human development more complete information to help ensure that public policies What would the outlook for human development throughout the have a greater chance of succeeding. region be if inequality were included in the task of calculating the human development index?10 This Report proposes an approach that would make it possible to overcome the constraints associ- Inequality hinders the fight against poverty ated with the use of an averages-based method of calculating The fight against poverty is pegged to the growth of average in- indicators, as these tend to cover up existing inequalities in the come and to changes in the way it is distributed (Bourguignon, distribution of human development. This Report suggests using 2004). This relationship makes it possible, for example, to associ- the very same human development dimensions that make up ate levels of inequality with the feasibility of accomplishing the the traditional HDI, but then, instead of simply arriving at the MDGs. Thus, it is possible to calculate the growth rate needed arithmetic mean, aggregating them and attaching more weight to in each country to meet the MDG aimed at reducing poverty, those dimensions that are lagging further behind, thereby making given different change scenarios regarding the distribution of human development measurements more relevant by factoring income.12 in the importance that a given society places on inequality (Foster, According to estimates of the joint UNDP-ECLAC and IPEA López-Calva and Székely, 2005). An analysis of 18 LAC countries (2003) project, halving the incidence of extreme poverty by 2015 for which recent information is available reveals that the HDI in relation to the level reported in 1990, would require consid- drops off sharply when adjusted for inequality.11 erably higher growth rates in those countries that present very Chart 9 portrays the loss in points that the HDI suffers in high initial levels of inequality, particularly among the poorest absolute terms and the loss expressed as a percentage of the origi- economies (based on the assumption that inequality does not nal HDI for the countries in question. It is evident from Chart 9 change or does so only marginally). The required growth rates that for most countries the inequality-based adjustment entails would be substantially lower for these same countries if they a drop of over 15% from the original HDI, whereas for some were able to generate lower prevailing inequality. Applying the countries inequality “costs” them between a fifth (Guatemala) same approach, Machinea and Hopenhayn (2005) proved that if a hypothetical assumption of a 10% reduction in the Gini income 10 The following results stem from estimates reached as part of a study conducted by the coefficient were made, the required growth rates would drop Centro de Estudios Distributivos Laborales (Center for Distributive, Labor and Social Studies) from Universidad Nacional de la Plata (CEDLAS, 2010), in which a group of from 9.4% to 7% per annum in Bolivia; from 4.9% to 3.1% in inequality-sensitive indices for 18 LAC countries was measured on the basis of a methodology developed by Foster et al. (2005). This methodolody had already been applied Guatemala; from 8.1% to 6% in Honduras; from 6.1% to 4.2% to measure inequality throughout Mexican states and municipalities, and significant in Nicaragua, and from 8.8% to 6.8% in Paraguay.13 changes were observed in the HDI by introducing inequality into the equation (see UNDP, 2003). More recently, this same practice was conducted in the provinces of Argentina (see UNDP, 2009). 11 The calculations presented on this particular occasion are not comparable with those 12 “Iso-poverty” curves are constructed from this platform. These are essentially combina- published each year by the UNDP. The introduction of inequality into the HDI, as pro- tions of GDP growth rates and changes in inequality that would enable society to reach posed herein, requires the use of household indicators taken from standardized national the poverty levels required by the MDGs for 2015. surveys. It should be noted that some of the indicators differ from those used when 13 The Gini coefficient is an indicator employed traditionally to measure the income inequality calculating the traditional HDI, due to the fact that information is not always available for a group of people. It ranges from zero (reflecting perfect equality in which everyone at all levels of disaggregation. For example, there is no information on the life expec- has the same income) to one (a value that describes the extreme hypothetical case in tancy indicator for households, thus requiring the use of variables that roughly reflect which just one person possesses all the income). In other words, the higher the Gini value, achievement in the life expectancy dimension. Alternative approaches to estimating the greater the prevailing income inequality. For a more detailed discussion, see Foster each of the dimensions can be found in the work of Vigorito and Arim (2009). and Sen (1997). The Gini index is the Gini coefficient expressed as a percentage.

28 Executive Summary Chart 9* Latin America and the Caribbean (18 countries). The weight of inequality on the Human development index (IDH). IDH losses attributable to inequality by country. Circa 2006 (e=2)

HDI index The weight of (without considering inequality) inequality

0.9 Argentina

Uruguay Chile Argentina Costa Rica Uruguay Venezuela (Bolivarian Rep. of)

0.8 Panama Chile Mexico Ecuador Brazil

Dominican Rep. Peru Paraguay Bolivia (Plurinational State of) Costa Rica 0.7 Colombia Venezuela (Bolivarian Rep. of) Mexico, Panama Ecuador

El Salvador

Brazil Honduras Guatemala 0.6 Dominican Rep.

Peru, Paraguay

Nicaragua

Colombia 0.5

El Salvador

Bolivia (Plurinational State of) 0.4

Honduras

0.3 Nicaragua * Corresponds to Chart 2.13 in the Report. Source: HDR Team calculations based on CEDLAS (2010) and SEDLAC (CEDLAS and World Bank, 2010) data.

Regional Human Development Report for Latin America and the Caribbean 2010 29 Chart 10* Latin America and the Caribbean (18 countries). Impact of inequality on each component of the human development index (HDI) by country, and average impact for Latin America and the Caribbean. Circa 2006 ( =2) (%)

HDI Income index Education index Life expectancy index Nicaragua Bolivia (Plurinational State of) Honduras Colombia El Salvador Guatemala Peru America for Latin Average and the Caribbean Brazil Paraguay Dominican Republic Venezuela of) Rep. (Bolivarian Costa Rica Ecuador Panama Mexico Chile Argentina Uruguay 0

-10

-20

-30

-40

-50

-60

-70

* Corresponds to Chart 2.14 in the Report. Source: HDR Team calculations based on CEDLAS (2010) and SEDLAC (CEDLAS and World Bank, 2010) data

Inequality restricts the development opportunities of broad Why does inequality persist? swathes of the population, hinders the training of human capital and limits prospects of investment in education and health, which Inequality is transmitted in turn undermines economic growth capacity. Furthermore, by from one generation to the next preserving institutions that uphold the interests of the dominant As mentioned above, another defining feature of the region, sectors, inequality exacerbates the relative concentration of wealth apart from its high levels of inequality, is the low mobility of in the richer echelons of society (Bourguignon, Ferreira and socioeconomic indicators between generations. Past studies Walton, 2007). Similarly, high inequality weakens the regulatory have illustrated, for example, the extent to which the schooling capacity of the state and, against this backdrop of institutional or income levels of one generation are influenced by those of frailty, increases the likelihood of the state being captured by the the preceding generation. Available information demonstrates most powerful economic groups (Guerrero, López-Calva and that for Latin America and the Caribbean, the achievements of Walton, 2009). Inequality also tends to stir up social tensions, one generation are related to those of the following generation. which may heighten political and institutional instability, thus Thus, LAC has relatively poor “mobility” in terms of schooling affecting not only the country’s governance, but also the incen- and income in comparison to other parts of the world. tives for domestic and international investment, among other In LAC, the impact of one generation’s level of schooling factors (Machinea and Hopenhayn, 2005). on the immediately following generation is more than twice as high as that reported in the United States. The correlation of educational achievement between two successive generations stands at 0.21 in the United States, whereas this same value in LAC ranges from 0.37 in Paraguay to 0.61 in El Salvador (see Chart 11). Furthermore, it has been suggested that educational mobility (meaning the change in the levels of education from

30 Executive Summary one generation to the next) and access to higher education have the preceding generation (Chart 12).14 In terms of income, inter- been the most important factors in determining socioeconomic generational mobility calculated for a more reduced sample of mobility between generations in certain countries from the countries also reveals relatively low levels, i.e. high correlations region. For example, the decline in inequality reported in Chile between the levels of economic performance of two successive between 1990 and 2006 can be largely explained by the major generations (Chart 13). expansion of tertiary education over the same period (Eberhard and Engel, 2009). Contextual and binding constraints A more accurate analysis of inter-generational linkages can What are the factors that cause one generation’s achievements be obtained by centering attention on one specific group, namely to influence those of the next generation? The decisions that young people . As an example of low relative mobility, studies parents make in relation to the health and education of their have shown that the current level of schooling among young children are influenced by two different kinds of factors.O n the people from the region is closely pegged (particularly from one hand, there are factors related to the household’s character- secondary education onward) to the schooling achievement of istics (parents’ achievements, level of income, family make-up), while on the other, there are contextual factors, which reflect the availability of, and access to, basic services (which, in turn, depend on the cost of the services, as well as their proximity and Chart 11* United States and Latin America and the Ca- quality). All these factors together are called binding constraints, ribbean (19 countries). Educational mobility. Correlation and a distinction must be drawn between these two types of fac- coefficient betweem generations. End of the nineties. tors in order to formulate improved public policies better suited to tackling inequality. United States 0.21 Figure 2 shows an example of the parents’ decision-making Paraguay 0.37 process regarding their children’s schooling.. Note how a parent’s

Panama 0.41 decision not to send a child to school may be based on a variety of factors, including the family’s inability to meet the educational Uruguay 0.41 costs involved, or its perception that returns on education will be Jamaica 0.44 low due to poor teaching quality or the constant absenteeism of Chile 0.45 the teachers. In each case, the problems raised by each of these Venezuela (Bolivarian Rep. of) 0.48 factors require specific policies to be rolled out, thus the importance of conducting in-depth analyses into the context and of Dominican Republic 0.48 obtaining detailed information on the binding constraints facing Peru 0.48 households in each case before then moving on to formulate Honduras 0.50 and implement public policies. Colombia 0.51

Costa Rica 0.51

Bolivia (Plurinational 0.53 Aspirations and agency State of) Apart from affecting access to basic services, binding constraints 0.53 Argentina influence subjective elements related to the formation of people’s 0.54 Mexico aspirations and agency capacity. Aspirations are the part of culture

Ecuador 0.55 that looks towards the future and essentially drives people to make

Brazil 0.55 the decisions needed to move toward a desired situation. Aspira- tions reflect the goals that matter to people and which, therefore, Guatemala 0.55 people wish to achieve. Agency, on the other hand, determines Nicaragua 0.57 people’s effective capacity to act on their reality to accomplish El Salvador 0.61 the objectives and aspirations they have set for themselves (Rao 0 0.2 0.4 0.6 0.8 and Walton, 2004). Agency therefore reflects people’s capacity to Correlation coefficient between generations achieve their desired goals autonomously.

* Corresponds to Chart 1.1 in the Report. 14 The transmission of low levels of schooling achievement worsens when the quality of Source: Behrman, Gaviria and Székely (2001). the education received by the strata of society with the lowest income is considered (ECLAC, 2007).

Regional Human Development Report for Latin America and the Caribbean 2010 31 Chart 12* Latin America and the Caribbean (18 countries). Intergenerational schooling progress. Circa 2005 (%)

Parents’ level of schooling** Vocational and Primary schooling Up to secondary Secondary university training University training incomplete incomplete complete incomplete complete Percentage of children who completed level...

Primary 85.5 97.1 98.3 98.8 98.4 schooling

Secondary 32.7 51.9 92.7 90.8 91.1

University 3.1 5.9 5.4 18.7 71.6

Note: The image includes data for 18 Latin American and the Caribbean countries and depicts the following percentages: young people aged 15 to 19 who completed primary education; young people aged 20 to 24 who completed secondary education; and young people aged 25 to 29 who completed university studies, with reference to the level of schooling in the household. * Corresponds to Chart 1.2 in the Report. ** Average years of study of the head of the household and his/her spouse to gauge the education of the parents. Source: prepared by the author based on ECLAC data (2007).

Chart 13* Developed countries (6 countries) and Latin Figure 2* Determinants of educational attainment America and the Caribbean (3 countries). Intergeneratio- nal mobility. Intergenerational income elasticity Costs of school tuition Household´s decision: Costs of uniforms and supplies 0.70 Number of years of schooling Monetary transfers for their children 0.60 0.60 0.58 0.52 0.50 Availability and quality of 0.50 0.47 schools and instructors 0.41 0.40 Children´s characteristics 0.32 Children’s educational (cognitive abilities, level achievement 0.30 of nutrition, health status, etc.)

0.19 0.19 0.20 Household´s characteristics (parents´ educational Elasticity of Intergenerational Income Elasticity of Intergenerational 0.10 achievement, access Parental (household) decision: to credit, etc.) Amount of daily effort expended to ensure that child gets the most 0 Costs of school tuition out of school (purchase school supplies, provide help Peru

Chile Costs of uniforms and supplies Brazil France Nordic

Canada with lessons, etc.) England Monetary transfers Germany Countries United States

* Corresponds to Chart 1.3 in the Report. Source: Azevedo and Bouillon (2009). * Corresponds to Figure 3.2 of the Report Source: HDR Team research based on Rosensweig and Schultz (1989) and Schultz (2004).

32 Executive Summary Table 6* International comparison of tax burden as a percentage of gross domestic product. 2005 (%) Goods and Income and Property Other direct Subtotal of Social Region or country Total services and Other taxes capital gains taxes taxes direct taxes security transport Latin America and the 17.0 3.8 0.8 0.2 4.8 9.4 0.5 2.3 Caribbean OECD 36.4 12.9 2.0 0.0 14.9 11.5 0.2 9.3 EU 15 40.1 13.7 2.1 0.4 16.2 12.1 0.3 11.3 United States 26.8 12.5 3.0 0.0 15.5 4.6 0.0 6.6 Japan 26.4 8.5 2.6 0.0 11.1 5.3 0.1 10.0

* Corresponds to Table 5.1 in the Report. Source: HDR Team calculations based on Cetrángolo and Gómez-Sabaini (2007).

Both aspirations and agency are associated with a specific whereas tax collection from direct taxes levied on income and social, economic and political context, and influence households’ property is relatively low (see Table 6).16 decisions related to investment in human capital. For example, The tax reforms applied throughout the region in an attempt and with regards to mobility and educational achievement, to alter this balance have largely proved unsuccessful. Certain Arias-Ortiz (2010) contend that people’s perceptions of existing academics contend that consumer taxes can be used as an effective mobility are a key factor in their decisions to invest in their chil- mechanism for redistribution, in that they increase the fiscal capac- dren’s education. According to their findings, those households ity of the state, provided that public spending is progressive (Engel, that perceive more mobility (in other words, that mobility is Galetovic and Raddatz, 1998). This argument, however, is based possible and is therefore worth the effort required to obtain it) on the initial assumption that there is a political balance making it tend to invest more in schooling. The difference, in comparison unfeasible to increase taxes on income, earnings and ownership. to households that do not view mobility as possible, amounts to Moreover, information on the taxes paid by those companies and at least one year of studies.15 people that top the scale in terms of earnings and income distribution Thus, existing studies highlight the need to implement a is not publicly available for most LAC countries. Without violating public policy based on a broader outlook. When designing and/ the principle of privacy, it should be possible to find out how much or implementing specific social initiatives and policies, not only money the fifty wealthiest people and the leading companies in observable factors (housing conditions, levels of schooling, family each country pay as income tax. As it currently stands, it is simply make-up) must be taken into account, but also less directly vis- not possible to get hold of this valuable information. ible processes, such as the formation of aspirations and agency Although figures reveal that social expenditures in the region capacity, which affect people’s behaviour as they pursue the has increased over the last 15 years in absolute terms, per capita, objectives that matter to them. and also as a proportion of both total spending and gross domestic product (GDP), the changes geared towards forging a more The political system does not allow the region progressive and transparent tax collection structure have either to compensate for inequalities failed or petered out over time. This is due to the fact that, through The stubborn persistence of inequality is also due to structural a systemic bias, the different capacities of people to influence aspects of the political system and the state, particularly the dif- public policies help to perpetuate structures of inequality. ferent forms of political representation. Existing mechanisms The second example essentially concerns the regulatory capac- for decision-making and the ways in which the interests of the ity of the state. It is evident that more vulnerable groups have less different groups are aggregated can help to propagate inequality chance of having their voice heard as consumers. With this in or, at the very least, hamper the task of reducing it. There are mind, guaranteeing contexts of real economic competition, while two prime examples of this situation. effectively regulating markets prone to natural monopolies, are The first example is the tax structure. Albeit with certain both key functions of the state. Institutional frailty has a negative exceptions, and in contrast to the situation in other regions or bearing on the state’s ability to discharge these functions, and countries, LAC is characterized by a tax system that favours tax often means that those people with less income are often excluded collection through consumer taxes (and indirect taxes in general), from certain markets, or have access but under very unfavourable

15 The author relied on the data of the Latinobarómetro public opinion survey and explored 16 A guide to the issues surrounding this subject can be found in the documents of the the problems of double causality in the analysis. Agenda towards the Construction of Citizenship in Latin America (OAS-UNDP, 2009).

Regional Human Development Report for Latin America and the Caribbean 2010 33 conditions.17 A number of recent studies have highlighted the income and exacerbates inequality. These effects are not only fact that companies with market power tend to exert consider- regressive in terms of income distribution among households, able influence on the political and legal system, thus enabling but also aggravate regional inequalities (see Box 2). them to shield themselves from the regulatory action of the state Based on the hypothesis that inequality breeds inequality, (see, for example, Guerrero et al., 2009). Furthermore, exercising Figure 3 illustrates the channels through which this phenomenon market power is highly regressive in itself, in that it has a greater affects efficiency and growth. This line of reasoning is not only impact on the well-being of the population with lower levels of based on the starting conditions (high levels of inequality and state weakness), but also on the mechanisms through which 17 Markets featuring natural monopolies are those characterized by high fixed costs, such that the average cost decreases throughout the relevant range of product demand (and inequality is transmitted: differential access to influence public is greater than the marginal cost). Prime examples would be certain segments of the policies (including the problems associated with the quality of services sector with network characteristics: electricity transmission and distribution, drinking water, telephony (particularly fixed line market). representation, poor accountability and state capture) and inef-

Box 2* The regressive effect of market power on the well-being of households in Mexico

A perusal of specialised publications suggests that the exercise Table 1* Welfare losses as a result of the exercise of market power has extremely negative effects on the living of market power, by income deciles conditions of the most vulnerable groups in society. A number of research efforts, including studies conducted by Creedy and Dixon Urban households Rural households (1998; 1999) for the case of Australia, work done by Comanor and Smiley (1975) and Hausam and Sidak (2004) on the United States, and the analysis carried out by Urzúa (2008; 2009) on Mexico, unanimously conclude that the exercise of market power Decile Decile is regressive and has a proportionately greater negative impact on low income sectors..

In the case of Mexico, available data show that the exercise of least-affected decile least-affected decile Loss as a proportion of Loss as a proportion of Loss as a proportion the loss observed in the loss observed in market power on a set of consumer goods and services not only has a greater negative effect on lower income households, but this I 1.198 I 1.264 regressiveness can also be observed geographically, since as a result, II 1.176 II 1.219 poorer states, generally those in the south, experience greater III 1.158 III 1.236 relative declines in welfare than more prosperous regions. Based IV 1.134 IV 1.214 on data obtained from the 2006 National Household Income and V 1.128 V 1.211 Expenditure Survey (ENIGH), Urzúa (2009) measured the decline in welfare endured by households as a result of the exercise of market VI 1.109 VI 1.150 power on the following products: tortillas, processed meat, soft VII 1.073 VII 1.148 drinks, milk, chicken and eggs, beer and medicine. The results clearly VIII 1.052 VIII 1.043 show that, in both urban and rural areas, declines in welfare become IX 1.036 IX (the least affected) 1.000 more pronounced as household income decreases. In urban areas, X (the least affected) 1.000 X 1.030 households that make up the lowest-income decile of the popula- Note: Losses shown are in relation with estimated losses for the least-affected income tion suffer relative declines in welfare that exceed by about 20% decile (decile X in the case of urban households and decile IX in the case of rural the declines observed in households in the highest-income decile households). * Corresponds to Table 1/Box 5.1 in the Report. of the population. Differences are even more pronounced in rural Source: HDR Team calculations based on Urzúa (2009b). areas: rural households in the lowest-income decile of the population face declines in welfare that exceed by 26.4% the reductions observed in households comprising the ninth decile. In regional results show that the highest-income households are the most terms, southern regions, which have the highest levels of poverty, affected, which is not surprising if one takes into account that generally face greater relative declines in welfare than regions in some of these services could be considered luxury goods (such as the north. In Chiapas, for instance, the decline in social welfare private education). Nevertheless, when these results are analysed observed is 31.0% greater than the decline in Baja California. in conjunction with data obtained for the case of consumer goods, By examining the declines in welfare resulting from the exercise it can be seen that overall declines in welfare due to the exercise of market power in the services sector, it is possible to see that these of market power are significantly greater in the poorest deciles declines are greater among the wealthiest strata of the population. of the population. The industries studied include transportation, private education, communications, energy, healthcare and financial services. The * Corresponds to Box 5.1 in the Report Source: HDR Team research based on Urzúa (2009a; 2009b).

34 Executive Summary social choice. With this in mind, the importance of variables such Figure 3* Inequality, efficiency and growth as state capacity; the strength of public institutions; costs of participation, negotiation and information; perceptions of the social Unequal structures value of equality and the relationships of representation between Inefficient market Rent seeking citizens and the political players, all serve to place the relationship functioning between social inequality and political inequality within a much Corporatist groups Slow and broader context. inequitable growth Although theoretically and from a normative standpoint democracy is expected, as a bare minimum, to guarantee fair Distorted policy design access for citizens to the resources and mechanisms that will strengthen their capabilities, it is essential to factor in the difficul- Weak institutions ties and problems inherent in its functioning, in that democracy is essentially a political system based on the aggregation, inter-

* Corresponds to Figure 5.1 in the Report. pretation and implementation of preferences. Democracy is, in Source: HDR Team research based on Guerrero López-Calva and Walton. (2008). essence, a political system of majority-based delegation, and as such entails the existence of multiple actors who have different, and often conflicting, information, influences and interests. ficient markets, which are such mainly because of concentrated Thus, the task of reducing human development inequality market structures and because certain companies wield dominant among people and groups depends largely on factors such as the market power. The upshot of all these factors is the uneven dis- possibility for citizens to gain access to mechanisms for acquiring tribution of resources and distorted public policy objectives, as information that will allow them to evaluate public policies in well as sluggish growth coupled with low levels of productivity. sufficient depth; the existence of a suitable institutional design that ensures that the preferences of the more underprivileged Agency, participation and political representation sectors are represented during collective decision-making pro- As regards the task of combating inequality, the state is able to cesses; and the proper functioning of political institutions that play an active role in broadening and guaranteeing access to help to prevent or curb state capture by minority groups. education and healthcare, for example, and in promoting fair The existence of irregular and illegal practices such as clien- access to high-quality services. Furthermore, it must ensure equal telism, state capture and corruption, which undermine and break access to political participation through institutional channels. the chain of delegation and insert agency and control problems This proposal, which forms part of the analysis contained herein, between the representatives and their constituents, can have a is consistent with the two pillars that underpin the human de- hugely negative impact on key aspects of human development. velopment approach: opportunity freedom and process freedom (see In each of these cases, uneven power relations and influences Chapter 1 of the Report). Equal human development therefore between different people and groups tends to hit the most vul- requires the existence of a strong and effective state. nerable sectors hardest and prevents them from escaping this The results of the analysis raise a number of questions: situation of relative disadvantage. Why does public policy not counteract prevailing and persistent In terms of the political economy, a basic agenda aimed at inequality and why, in certain cases, does it actually exacerbate combating human development inequality in LAC and prevent- the problem? How are social inequality and political inequality ing the intergenerational transmission of inequality could aim related? What factors cause different levels of influence in the to reduce inequalities in terms of power and influence with a decision-making processes of state institutions to perpetuate view to eradicating the aforementioned irregular practices, while or even increase social inequality? What are some of the most strengthening key state institutions and enhancing their credibility, important failings of the political system that result in the per- thereby fostering citizen commitment. In a similar vein, it would sistence of inequality throughout the region? be crucial to ensure that citizens become increasingly active and Assuming from the outset that democracy is inherently superior committed to political participation; this, in turn, would ensure as a value and that it is inseparable from the human development the visibility of all sectors of society and their needs, and reduce approach, it is necessary to pinpoint the specific empirical struc- the incidence of asymmetrical power relations and influence when tures of the democratic system that champion improved equality, implementing public policies and distributing resources.18 because it is precisely equal rights and duties for all citizens that underpin the universality of democracy as a fair and equitable 18 See, for example, the arguments raised by Evans (2004), Rodrik (1998) and Sen (1999).

Regional Human Development Report for Latin America and the Caribbean 2010 35 The role of public policies 2. Interventions must be comprehensive and based on a detailed analysis of the binding constraints that perpetuate What form should public policies aimed low levels of relative achievement. This includes taking at reducing inequality take? into account the incidence of objective, contextual and The two key characteristics of inequality in LAC, namely its resource-related conditions and constraints, and also sub- intensity and persistence within a context of low social and jective aspects that help shape individuals’ aspirations and economic mobility, make it necessary for policymakers to gain the objectives they set for themselves in life. a better understanding of the mechanisms that affect the transmission of such heterogeneous levels of achievement between 3. Although there are important reforms related to the state’s households belonging to different socioeconomic groups. It capacity to respond to the challenges and constraints im- will be essential to identify and analyse the multiple constraints posed by inequality, public policies aimed at addressing facing households within their own specific contexts, as well this problem can incorporate elements that strengthen as the political processes that help reproduce these conditions, citizen dynamics and empowerment, such as setting basic in order to develop public policies capable of breaking through rules governing transparency, improving the accountability the vicious cycle that perpetuates inequality of human develop- of operators of public interventions, and strengthening ment in LAC. consumer protection mechanisms in specific markets. This Report emphasises the need to design interventions When designing programmes, it is important to incor- that will have a greater impact on households and interrupt the porate elements that help to empower and strengthen transmission of low levels of relative achievement in specific potential beneficiaries’ citizenship. Examples of these indicators such as life expectancy, education and access to the elements include ensuring transparency when selecting job market. The binding constraints approach seeks to contribute the intended beneficiaries, preventing political manipula- to the design and deployment of public policies that tackle those tion, and creating legal instances before which appeals may constraints facing households which ensure that inequality is be lodged in the event that the rights stipulated by public transmitted from one generation to the next. policy are not provided.19 In a context related to the methodology proposed in this Report, Sen (2005) offered what he called the “Three R’s of Although there are programmes that have already incorporated Reform” analysis, referring to Reach, Range and Reason. Put these kinds of elements, it is necessary to expand and augment simply and in connection with the approach proposed herein, this broad approach to public policy. Chile Solidario (see Box Sen’s model meant firstly that public actions must reach the 3) and Comunidades Solidarias Urbanas, in El Salvador, for individuals, households and communities for which they were example, are both programmes that have the coherent design designed (Reach). Similarly, in order to be effective, these public characteristics of comprensive public policies. actions must be comprehensive, meaning that they must affect a whole range of binding constraints present in the environment (Range). The path ahead Lastly, the reforms must be consistent and affect the aspi- As confirmed by this Report, inequality is indeed a complex rations, goals and autonomy of the intended beneficiaries, so problem. Although inequality reduction is directly related to they can become agents rather than merely passive recipients combating poverty, an inequality approach requires the devel- of development policies (Reason). opment of a distinct perspective and the application of specific This is the approach to public policy proposed by this Re- instruments that are different from those used to fight poverty. port. It is essential to remember that initial inequality is not Curbing inequality requires the development of a fully-compre- just another piece of information, but rather one of the most hensive public policy aimed at bridging the huge gaps between important factors behind the success of public policies. With this the different strata that make up LAC societies. Closing these in mind, three key elements come into play when formulating gaps by making different paths in life both visible and achiev- public policies: able, while expanding people’s freedom to choose effectively between different options, would help develop more connected 1. Interventions must be based on the clear definition of the

political coalitions that make them viable and take into ac- 19 For further reading on the political economy of designing conditional cash transfers count the cost-benefit matrix of the actors involved. and the effects thereof on citizenship, see Levy (2006), Camacho and Conover (2009) and Rodriguez-Chamussy (2009), in addition to the discussions raised in various chapters of this Report.

36 Executive Summary societies. Attention to territorial inequalities, and to inequalities level of the state and its systems of redistribution and regulation. relating to gender and racial or ethnic origin should be a priority The cycle whereby inequality is reproduced and perpetuated in for public policy planning, given that the specific institutional, LAC can be reversed through the design and implementation cultural and historical factors of each of the countries in the of comprehensive policies that tackle all the binding constraints region raise particular challenges. that block the way to spaces of effective choice for large swathes The message that this Report wishes to convey is that the of the population,. As regards the fight against inequality within intergenerational transmission of inequality can be broken. households and their immediate surroundings, this Report pro- To achieve this,,actions must be taken not only at the level of vides specific examples of initiatives that have been deployed in households and their immediate surroundings, but also at the the region with promising results. Regarding systemic issues, the

Box 3* The Chile Solidario Programme

The aim of the Chile Solidario programme is to help reduce poverty The objective of this preferential access is to make participating mainly from the standpoint of demand by providing short-term households become “visible” to public service providers so that they assistance (psychosocial support, direct cash transfers and social can better meet the needs of this sector of the population. In order assistance programmes) and by implementing a medium-term to bridge the gap in demand for these services, the programme development strategy that seeks to afford families in poverty pre- helps participating households connect with public service providers ferential access to public services in order to raise their standard (the social protection network) and to independently access the of living. This programme is also characterised by its explicit focus service provision network of their choice. aimed at coordinating ongoing initiatives and maximising their The social services component of the programme seeks to benefits for households that live in extreme poverty and that, coordinate the actions of the various existing agencies, so that therefore, have urgent needs. the social services provided are suited to the actual needs of the Families who benefit from this programme come from the population each is designed to serve. This component, in turn, poorest segments of the population and are chosen based on a seeks to determine in which cases it is necessary to offer services test of socio-economic status. As part of the programme, income at the local level. This comprehensive approach is based on data transfers are made to women so that they can meet their families’ showing that isolated and sector-based programmes are not most pressing needs. The design of this programme, which aims effective in addressing the multiple dimensions of development to increase the welfare of households living in extreme poverty, that are closely interrelated, nor do they promote the emotional is based on a strategy that works on both the demand for and well-being of people living in extreme poverty. In practice, the provision of public services. Moreover, the programme limits coordination of actions aimed at influencing the dimensions of households’ participation to a maximum of five years. employment, health, education, housing and children’s services, A fundamental aspect of the demand component of the Chile among others, is carried out at the local level. This is done with Solidario programme is an intense period of psychosocial support specialised and highly motivated staff. In addition, regular local that lasts for two years and is centred on contacts between the meetings are held between the sectors responsible for providing beneficiaries and programme development specialists. The interval the different services. between meetings gets longer over time. During this period, a The results of the assessments of the Chile Solidario progra- local social worker works intensively with families on planning a mme show that it has made remarkable achievements, including: strategy that will enable them to escape from extreme poverty. i) a significant positive effect in terms of the access by beneficiary These social workers also provide social assistance in a number of households to public services, which is one of the programme’s areas (identification of family dynamics, education, health, housing, main objectives; ii) a significant improvement in the likelihood employment, income, etc.), dimensions in which households should that children aged 4 to 5 and from 6 to 15 attend school; iii) an attain minimum levels of achievement as a result of their partici- increased probability that beneficiaries register with the public pation in the programme. Thus, the social worker has a dual role: health system, and an increased number and frequency of visits to help families create or restore their functions and capabilities, to healthcare centres for preventive care of children under 6 years while at the same time helping them become “connected” to a of age; iv) an increase in visits to healthcare centres for preventive network of social services. care for the elderly; v) significant improvements in the psychosocial As part of the assistance component of the programme, each well-being of the beneficiaries; and vi) in rural areas, a reduction participating family receives a monthly cash transfer, the amount of in the incidence of poverty and destitution in 20% of participating which, in itself small, decreases over time and is intended to offset households. the cost of participation. In addition, during the intensive initial phase and for three years thereafter, beneficiary households receive * Corresponds to Box 6.3 in the Report. preferential access to various public subsidies and social programmes. Source: HDR Team analysis based on Galasso and Carneiro (2009).

Regional Human Development Report for Latin America and the Caribbean 2010 37 state’s tax capacity and its regulatory effectiveness both require The purpose of this Report is to help make inequality the centre reforms in order to modify the structure of incentives for politi- of public policy debate and to propose specific measures aimed cal actors by making regressive policies more visible and costly. at combating inequality, thereby leading to greater efficiency in Thus, by implementing reforms that help the system of political the fight against poverty, increased economic growth accompa- representation and state action respond better to the demands nied by greater levels of inclusion, more efficient functioning and interests of groups with lower levels of relative influence, it of the state, and improved quality of the systems of political will be possible to enhance the progressivism of public dynamics. representation.

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40 Executive Summary Executive Summary Regional Human Development Report for Latin America and the Caribbean 2010