Comments on IDB “Strategy on Social Policy for Equity and Productivity”

1. Nora Lustig Samuel Z. Stone Professor of Latin American Economics Dept. of Economics, Tulane University Nonresident Fellow, Center for Global Development and Inter-American Dialogue Washington, DC, February 28, 2011 Comments on IDB “Strategy on Social Policy for Equity and Productivity”

2. Priority areas for IDB • Investing in early childhood • Improving school quality • Addressing youth at risk • Improving labor markets and extending coverage of social security • Addressing the double burden of the health transition • Improving CCTs and other anti-poverty programs • Fostering social inclusion

3. Contextualize the Strategy In addition to the inequality and poverty trends, education gaps, youth at risk, health burdens: • Growth and growth prospects for the region; heterogeneity (commodity importers vs. commodity exporters) • Demographic transition • Fiscal space • Challenges: rising food prices, climate change (systemic adverse shocks), water scarcity

4. Consider Additional Instruments • Lending program • Non-lending activities • Knowledge and information: creation and sharing • What about: • Advisory services and technical assistance: what role will they play? • Raising public awareness: should it be part of the strategy? • Providing support to local agents of change: should it be part of the strategy?

5. Some areas to emphasize • Declining inequality: sustaining the momentum • The challenge of rising food prices • Assessing fiscal policy’s contribution to equity goals • Improving quality and accessibility of data • Promote accountability and transparency

6. Declining inequality in LA: yearly change in Gini 2000-2009

7. Poverty Impact of Rising Food Prices

8. Redistribution through taxes and transfers is very limited

9. Research questions • Labor market dynamics (Goldin and Katz, 2008; Schady et al., 2010) • Relationship between growth patterns and declining inequality • Why is inequality rising in some countries? • Indirect impact of CCTs on local economies • Assessing the contribution of fiscal policy to poverty and inequality reduction

10. Policy challenges • Improving access to post basic secondary education; supply/demand side interventions? • Safety net design: counter-cyclical and responsive to shocks. In particular, what to do with rising food prices? • Increase progressivity of tax-and-transfer system

11. Improving quality of data and accessibility • Household surveys are still deficient: urban areas only, not comparable over time, not comparable across countries, egregious misreporting, do not include information on taxes and transfers • => back to “old” MECOVI • IDB’s online databank of household surveys • IDB’s online data on poverty and inequality (join forces with SEDLAC/WB?)

12. Promoting accountability and transparency • Best practices in accessibility to information (e.g., household surveys and tax return data by OECD countries) • Best practices in institutionalizing objective poverty and inequality measuring and evaluation of social policy and programs (e.g., CONEVAL? )

13. THANK YOU