Gustavo Márquez, RES. Coordinador General
Alberto Chong, RES; Suzanne Duryea, RES; Jacqueline Mazza, SCL; Hugo Ñopo, RES
Economic and Social Progress in Latin America, IPES 2008Inter-American Development Bank
Gustavo Márquez, RES. General Coordinator
Alberto Chong, RES; Suzanne Duryea, RES; Jacqueline Mazza, SCL; Hugo Ñopo, RES
LACEA - LAMES 2007
Bogotá, Colombia - October 5, 2007
22
Three main messages
Social exclusion is a phenomenon associated Social exclusion is a phenomenon associated with, but very different from poverty. with, but very different from poverty.
Social exclusion have significant economic Social exclusion have significant economic costs than can be measured.costs than can be measured.
Advancing social inclusion calls for public Advancing social inclusion calls for public policies that go beyond poverty alleviation policies that go beyond poverty alleviation programs.programs.
Social exclusion is a phenomenon associated with, but very different from poverty.
44
Social Exclusion …
NatureNature– Is a social, political and economic dynamics that blocks group Is a social, political and economic dynamics that blocks group
and individual access to resources and opportunities, thus and individual access to resources and opportunities, thus limiting their ability to obtain outcomes valuable in a market limiting their ability to obtain outcomes valuable in a market economyeconomy..
MechanismsMechanisms– Operates through formal and informal institutions that reduce Operates through formal and informal institutions that reduce
the liberty and functioning of the excluded, reducing their the liberty and functioning of the excluded, reducing their well-being.well-being.
ResultsResults– Affects the attainment of income, consumption, and political Affects the attainment of income, consumption, and political
and social participation by the excluded. Increase transaction and social participation by the excluded. Increase transaction costs and hinders governance agreements for society as a costs and hinders governance agreements for society as a whole. whole.
55
Why Social Exclusion?
To expand the focus of analysis and policy beyond poverty.
The concept of exclusion focuses on the multi-dimensional nature and dynamics of deprivation, on the interactions between these dimensions, and on the individual and the family as part of a community.
Our fundamental concern is the identification of the social processes where exclusion is generated and reproduced.
66
Discrimination, Stigmatization and Traditional Forms of Exclusion
The Traditional Forms of ExclusionThe Traditional Forms of Exclusion
88
Discrimination and Exclusion
Discrimination and stigmatization based on Discrimination and stigmatization based on group group identitiesidentities (gender, race, religion, ethnicity) have been (gender, race, religion, ethnicity) have been the traditional forces of exclusion in the region since the traditional forces of exclusion in the region since colonial times. colonial times.
This type of exclusion is visible through the This type of exclusion is visible through the relative relative deprivationdeprivation that these groups suffer, in terms of that these groups suffer, in terms of income, education, housing, infrastructure, and health, income, education, housing, infrastructure, and health, but also in terms of their jobs and their political but also in terms of their jobs and their political participation, among others. participation, among others.
The academic literature in the region has concentrated The academic literature in the region has concentrated in documenting this relative deprivation. More recently, in documenting this relative deprivation. More recently, the emphasis has moved towards analyzing the emphasis has moved towards analyzing the the processes that result in this relative deprivationprocesses that result in this relative deprivation. .
99
Who is Discriminated Against?
Most Discriminated-Against Groups in the Region, 2001
0 5 10 15 20 25 30
ArabsWhites
Religious groupsChinese, Japanese, Asians
Jew ishMulattos, mestizos
HIV-positiveThose belonging to an interest group
Those belonging to a particular political partyWomenYoung
HomosexualsIlliterate people
DisabledImmigrants
EldersThere is no discrimination
OthersAfro-descendants
Indigenous peoplesPoor
PercentSource: Latinobarometer (2001).Note: Figure presents responses to the question "Which groups do you think are the most discriminated against, or do you think that there is no discrimination?"
1010
Why Are They Discriminated Against?
Reasons for Discrimination That Most Affect Population, 2004 and 2005
0 5 10 15 20 25 30 35 40
Being disabled
Being an immigrant
Don't know or no reponse
Being "nobody"
Being a w oman
Everyone is treated equally
Being old
Skin color
None
Not having connections
Not having enough education
Being poor
Percent
2004 2005
Source : Latinobarometer (2004, 2005).Note: Figure reflects responses to the question "Out of all the reasons for w hich people are not treated equally, w hich one affects you most?"
1111
Beyond Perceptions
Perceptions are relevant only to the extent that they Perceptions are relevant only to the extent that they affect the decisions, actions and outcomes of affect the decisions, actions and outcomes of individuals.individuals.
There is a notorious difference in wage levels across There is a notorious difference in wage levels across different groups (gender, ethnic, racial).different groups (gender, ethnic, racial).
However, the literature on wage differentials reveal However, the literature on wage differentials reveal that almost half of the wage difference is explained by that almost half of the wage difference is explained by different human capital endowments.different human capital endowments.
The evidence of discrimination, as shown by wage The evidence of discrimination, as shown by wage differentials unexplained by individual characteristics, differentials unexplained by individual characteristics, is notably less than that arising from the simple is notably less than that arising from the simple comparison of wage levels.comparison of wage levels.
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Unobservables Factors unobservable for the authors of a study, but Factors unobservable for the authors of a study, but
readily observable for an employer, can explain part readily observable for an employer, can explain part of the difference in outcomes.of the difference in outcomes.
A group of empirical studies uses experimental A group of empirical studies uses experimental economics techniques to evidence this (economics techniques to evidence this (http://www.http://www.iadbiadb..org/res/network_studyorg/res/network_study..cfmcfm??st_id=86st_id=86 ).).
The studies conclude that the notorious differences in The studies conclude that the notorious differences in outcomes between different groups do not necessarily outcomes between different groups do not necessarily result from discrimination, and that discrimination result from discrimination, and that discrimination itself is often reduced by better information flows.itself is often reduced by better information flows.
The distinction between differences in endowments The distinction between differences in endowments associated with gender, race or ethnicity and overt associated with gender, race or ethnicity and overt discrimination is crucial for the design of anti-discrimination is crucial for the design of anti-discrimination policies.discrimination policies.
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Results and Processes
The region is extremely unequal, but The region is extremely unequal, but discrimination is not the only cause of discrimination is not the only cause of inequality. The confusion between relative inequality. The confusion between relative deprivation and discrimination is one of the deprivation and discrimination is one of the fundamental deficits in the literature. fundamental deficits in the literature.
The design of policies of social inclusion The design of policies of social inclusion depends on our capacity to understand depends on our capacity to understand the the processesprocesses through which social exclusion is through which social exclusion is produced and reproduced, and to look produced and reproduced, and to look beyond solely traditionally excluded groups. beyond solely traditionally excluded groups.
Democratization, Macro Stabilization, Globalization and Changes in the patterns of Inclusion and Exclusion
The Modern Forms of ExclusionThe Modern Forms of Exclusion
1515
Modern Forces of Exclusion
Exclusion is an ever changing dynamic that has been Exclusion is an ever changing dynamic that has been molded by changes in the way the State operates. molded by changes in the way the State operates.
Democratization, globalization, and economic Democratization, globalization, and economic stabilization have changed the mechanisms and the stabilization have changed the mechanisms and the capacities of the State to integrate groups, through capacities of the State to integrate groups, through expansion of employment (public and manufacturing), expansion of employment (public and manufacturing), that gave access to the benefits of the local truncated that gave access to the benefits of the local truncated version of the Welfare State.version of the Welfare State.
Modern forces of exclusion (mostly economic and Modern forces of exclusion (mostly economic and social in origin) associated with these changes expand social in origin) associated with these changes expand the impact of exclusion to larger, less identifiable the impact of exclusion to larger, less identifiable groups. groups.
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Inclusion in Some Grounds for Some Groups
0 5 10 15 20 25 30
Argentina
Peru
Costa Rica
Dominican Republic
Mexico
Ecuador
Boliv ia
Colombia
Uruguay
Chile
El Salvador
Nicaragua
Venezuela
Panama
Honduras
Guatemala
Brazil
Paraguay
Percentage of total members of legis lative branch b
2000 1990
Participation by Women in the Legislative Branch, 1990 and 2000
Source: Smith (2005).a
No data are available for El Salvador and Honduras for 1990.b
In the case of bicameral countries, the percentage relates to members of the lower house.
a
a
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Inclusion: Education and Health
5
10
15
20
25
30
35
Quintile 1 Quintile 2 Quintile 3 Quintile 4 Quintile 5
Percentage of public expenditure on health and education
received by each income quintile
Argentina (1998) Bolivia (2002) Brazil (1997) Chile (2003)
Colombia (2003) Costa Rica (2000) Guatemala (2000) Mexico (2002)
Nicaragua (1998) Peru (2000) Uruguay (1998)
Distribution of Public Social Expenditure on Education and Health in Latin America, various years
Source : ECLAC (2006a).
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Exclusion: Pensions
0
10
20
30
40
50
60
70
80
90
Quintile 1 Quintile 2 Quintile 3 Quintile 4 Quintile 5
Percentage of public spending on pensions
received by each income quintile
Argentina (1998) Bolivia (2002) Brazil (1997) Colombia (2003) Costa Rica (2000)
Ecuador (1999) Guatemala (2000) Mexico (2002) Uruguay (1998)
Distribution of Public Spending on Social Security (Pensions) in Latin America, Various Years
Source: ECLAC (2006a).
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Low-Wage Jobs and Exclusion
Employment is the principal —if not the only– source Employment is the principal —if not the only– source of income for the majority of the population. Being of income for the majority of the population. Being unemployed or having a job without benefits or unemployed or having a job without benefits or documentation excludes these workers and their documentation excludes these workers and their families from mechanisms of protection normally families from mechanisms of protection normally associated with formal employment. associated with formal employment.
The proportion of workers with low wages and The proportion of workers with low wages and productivity has increased in the last 15 years. productivity has increased in the last 15 years.
This phenomenon has begun to affect larger and more This phenomenon has begun to affect larger and more diverse groups than those traditionally excluded. diverse groups than those traditionally excluded.
2020
The Number of Low-Wage Jobs has Grown in Most Countries in the Region
Evolution of the Percentage of Workers in Low-Wage Jobs 1990-1997 versus 1998-2004
Argentina
Bolivia Brazil
Chile
Colombia
Costa Rica
Ecuador
Honduras
Mexico Nicaragua
Panama
Peru
Paraguay
El Salvador
Uruguay
Venezuela LatinAmerica
-
10
20
30
40
50
- 10 20 30 40 50
First Period 1990-1997
Second Period: 1998-2004
Source: Márquez and Prada (2007) .
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Education and Low-Wage Jobs
-100 -50 0 50 100 150 200 250 300
Chile
Uruguay
Costa Rica
Honduras
Panama
Peru
El Salvador
Mexico
Bolivia
Ecuador
Brazil
Venezuela
Paraguay
Colombia
Nicaragua
Argentina
Percentage change in share of unskilled workers Percentage change in share of skilled workers
Source: Pagés and Prada (2007).
Percentage Change in Share of Workers in Low-Wage J obs by Skill Level, 1990–1997 versus 1998–2004
2222
Female labor force participation and Low-Wage Jobs
-100 -50 0 50 100 150 200 250
Chile
Costa Rica
El Salvador
Honduras
Mexico
Brazil
Nicaragua
Uruguay
Peru
Panama
Boliv ia
Ecuador
Colombia
Venezuela
Paraguay
A rgentina
Female Male
Percentage Change in the Share of Workers in Low-Wage Jobs by Gender, 1990–1997 versus 1998–2004
Source : Pagés and Prada (2007).
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Low-Wage Jobs and Exclusion
The expansion in the number and proportion The expansion in the number and proportion of low wage jobs is associated with the of low wage jobs is associated with the growth of unemployment, low growth rates growth of unemployment, low growth rates and an increase in the demand for education. and an increase in the demand for education.
Phenomena such as the change in the Phenomena such as the change in the sectoral structure of employment (more sectoral structure of employment (more services) and the increased participation of services) and the increased participation of women in the work force have smaller roles women in the work force have smaller roles in the explanation of this process. in the explanation of this process.
Social exclusion have significant economic costs than can be measured.
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Cooperation, Social Distance and Exclusion
Within the problem of exclusion is the problem of lack of Within the problem of exclusion is the problem of lack of confidence, limiting collective action and cooperation.confidence, limiting collective action and cooperation.
With a number of economic experiments, applied to With a number of economic experiments, applied to representative samples of 6 capital cities in the region, we representative samples of 6 capital cities in the region, we explored questions such as: To what extent do Latin explored questions such as: To what extent do Latin Americans collaborate with each other? What role does social Americans collaborate with each other? What role does social distance play in the determination of these egoistic or distance play in the determination of these egoistic or cooperative behaviors ?cooperative behaviors ?
2626
Cooperation and Social Distance
Trust, Education Gap, and Welfare Generation
40
41
42
43
44
45
46
Betw een -17 and -9 Betw een -8 and -3 Betw een -2 and 2 Betw een 3 and 8 Betw een 9 and 17
Education gap between player 1 and player 2
Percentage of initial stake offered by
player 1 (bars)
50
55
60
Foregone welfare generation (line)
(percent)
Source : Cárdenas, Chong, and Ñopo (2007).
2727
Heterogeneity and ConfidenceHeterogeneity of Session and Likelihood of Trust in Group
Bogotá
Buenos Aires
Caracas
Lima
MontevideoSan José
R2 = 0.0679
0
10
20
30
40
50
60
70
80
90
0 1 2 3 4 5 6 7 8
Standard deviation of years of education, per session
Percentage of participants who invested in
group account, per session
Source : Cárdenas, Chong and Ñopo (2007).
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What do We Find? Latin Americans have a natural propensity to trust and Latin Americans have a natural propensity to trust and
cooperate, but with some limitationscooperate, but with some limitations
This propensity to trust and cooperate is reduced with “social This propensity to trust and cooperate is reduced with “social distance” (ie: education), and emerges as a behavior distance” (ie: education), and emerges as a behavior consistent with people’s expectations. Reciprocity is an consistent with people’s expectations. Reciprocity is an important ingredient within this. important ingredient within this.
The limitations of trust and cooperation imply friction in The limitations of trust and cooperation imply friction in markets and increased transaction costs. As a result, market markets and increased transaction costs. As a result, market efficiency and value generation are reduced.efficiency and value generation are reduced.
Our experiments found that increases in trust and cooperation Our experiments found that increases in trust and cooperation among Latin Americans could imply increases in the among Latin Americans could imply increases in the generation of social value that range from 20% to 70%.generation of social value that range from 20% to 70%.
Advancing social inclusion calls for public policies that go beyond poverty alleviation programs.
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Public Policy and Social Inclusion
Inclusion is not a policy objective, but a societal Inclusion is not a policy objective, but a societal process that public policy can stimulate.process that public policy can stimulate.
Exclusion is a multi-dimensional, changing and Exclusion is a multi-dimensional, changing and dynamic phenomenon. Social inclusion shares dynamic phenomenon. Social inclusion shares these characteristics.these characteristics.
The policies of inclusion ARE NOT a new set of The policies of inclusion ARE NOT a new set of programs, but rather a new way of designing, programs, but rather a new way of designing, implementing, and evaluating public policies implementing, and evaluating public policies that aims at fostering equality of opportunities, that aims at fostering equality of opportunities, fighting discrimination, and increasing fighting discrimination, and increasing diversity. diversity.
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Inclusion and Public Policy
The policies of inclusion involve action at the The policies of inclusion involve action at the normative and institutional level, as well as in the normative and institutional level, as well as in the implementation of policies. The objective of these implementation of policies. The objective of these actions is to change the manner in which resources actions is to change the manner in which resources are allocated, institutions are governed and are allocated, institutions are governed and opportunities are accessed.opportunities are accessed.
Inclusion changes outcomes and the processes Inclusion changes outcomes and the processes through which people obtain them. Changes in the through which people obtain them. Changes in the functioning of, and access to institutions are crucial.functioning of, and access to institutions are crucial.
Inclusion is a range of advances in different areas in Inclusion is a range of advances in different areas in varying moments. varying moments.
The process of inclusion is dynamic and multi-The process of inclusion is dynamic and multi-dimensional: changes in education are necessary, but dimensional: changes in education are necessary, but not sufficient, nor substitutes for changes in other not sufficient, nor substitutes for changes in other dimensions (ie: labor market).dimensions (ie: labor market).
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In Summary
Social exclusion is a phenomenon associated with, but Social exclusion is a phenomenon associated with, but different than poverty. Inclusion requires different public different than poverty. Inclusion requires different public policies than those traditionally used to combat poverty.policies than those traditionally used to combat poverty.
Social exclusion has significant economic costs. Advances Social exclusion has significant economic costs. Advances in social inclusion reduce transaction costs and facilitate in social inclusion reduce transaction costs and facilitate the achievement of governance agreements.the achievement of governance agreements.
Progress in the process of inclusion requires fundamental Progress in the process of inclusion requires fundamental changes in the ways institutions are managed and in the changes in the ways institutions are managed and in the design, analysis and implementation of public policies.design, analysis and implementation of public policies.