Published on Let's Talk Development

Should inequality be reflected in the new international development goals?

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The last few months have been a busy time for inequality. And over the last few days the poor thing got busier still. Inequality is now dancing on two stages. It must be really quite dizzy.

We need an inequality goal. No we don’t. Yes we do

One of the two stages is the post-2015 development goals. At some point, someone seems to have decided that reducing inequality needs to be an explicit commitment in the post-2105 goals. The UN System Task Team on the Post-2015 UN Development Agenda wrote a report on inequality and argued that “addressing inequalities is in everyone’s best interest.” Another report by Claire Melamed of Britain’s Overseas Development Institute argued that “equity, or inequality, needs to be somehow integrated into any new framework.” Last week a group of 90 academics wrote an open letter to the High Level Panel on the Post 2015 Development Agenda demanding that inequality be put at the heart of any new framework.

But not everyone concurs. Last December Stephan Klasen, Professor of Development Economics at the University of Göttingen, wrote a blog post on The Broker entitled “No, we don't need an MDG for inequality.” And a couple of weeks ago Martin Ravallion, former World Bank Research Director and now Professor of Economics at Georgetown University, wrote a post on the same site entitled “Let’s avoid creating a dog’s breakfast of MDGs” in which he too argued that a goal for inequality isn’t needed.

Inequality has been dancing recently on another stage too: the World Bank. At his first Annual Meetings in Tokyo last year the Bank’s new president, Jim Yong Kim, said: “The World Bank Group’s mission is to end poverty and build shared prosperity. That’s why I’ve asked the institution to come up with a bottom line in the form of ambitious targets for these two goals.” The speech signaled two changes for the Bank – a bolder poverty goal involving the ending of poverty, not just its reduction; and a shift away from a pure poverty focus toward a broader mission that embraces inequality.

Here too there has been debate. Last week The Guardian carried a piece claiming slippage by the Bank on the shared prosperity part of its new mission on the grounds it looks set to track "shared prosperity" by looking at the income growth only of the bottom 40%. “Bank's promotion of 'shared prosperity' fails to tackle inequalities and growing gaps between rich and poor, critics warn” ran the article’s headline. (For the record, the leaked documents The Guardian saw are merely drafts – the monitoring framework isn’t actually set in stone.)

Unpacking the debate

One thing to clarify upfront: neither Prof Klasen nor Prof Ravallion is an anti-egalitarian; far from it. Their point is that given the commitment to reducing poverty, an inequality goal is superfluous. Economic growth that leaves inequality unaffected reduces poverty by less than growth combined with reduced inequality. So if the poverty goal is ambitious enough, reaching it will necessarily require that countries reduce inequality. In fact, it’s possible to write down a mathematical relationship between changes in poverty on the one hand and economic growth and changes in inequality on the other. For a given set of economic growth forecasts, a particular poverty target tells you how inequality has to change to reach it. You could easily inadvertently set an inequality target that isn’t consistent with your poverty target. In short, you could quite easily make for yourself a nice dog’s breakfast. Which, unless you have a hungry dog, isn’t what you want to do.

This argument sheds some light on the “shared prosperity” issue too. The goal of “ending poverty” is a very ambitious one, and its achievement will likely require that countries reduce income inequality. It’s possible in other words that ending poverty will necessarily require a greater “sharing of prosperity” than there is right now. I guess the question then becomes: How far will inequality need to fall, given current growth forecasts, for poverty to be “ended”? With very strong growth, the reduction in inequality might not be “enough” for an egalitarian.

Perhaps what would be useful for both agendas are some numbers showing how far inequality would likely have to fall if poverty is to be ended under different economic growth forecasts. That way we could see whether a separate inequality goal is needed.

What does all this mean for human development goals?

This discussion raises the question of whether inequality targets are needed for non-income goals such as education and health. Klasen argues they’re not needed. In fact he says the case for not having an inequality goal is “even clearer” in the case of the non-income goals.

“Universal primary education or massive reductions in mortality cannot be achieved without reducing inequality in health and education. The rich, healthy, and educated are already doing so well on mortality and education indicators that further improvements for them will simply not even come close to achieving the large reductions called for by the MDGs.  Declining income, education and health inequality is thus a critical means to achieving the MDGs… a separate inequality goal seems redundant.”

Here it’s worth being clear what we mean by inequality. Do we mean “pure” inequality – the differences across people in education and health outcomes? Or do we mean inequalities in education and health between the poor and the rest of the population?

If we mean the former, for many indicators the population average and inequality move hand-in-hand. For a binary indicator, the Gini coefficient equals one minus the mean. So as the mean rises towards one (e.g. every child is immunized), inequality falls towards 0. But as the mean falls towards zero (e.g. no child dies before their first birthday), the Gini coefficient rises toward 1.

I’ve blogged elsewhere about inequalities in education and health outcomes in the context of the Human Opportunities Index. I argued that the HOI doesn’t in practice capture all the “morally relevant” inequality in their data, since it classifies as fair too much of the inequality in education and health outcomes. But I also agree that looking at “pure” or “total” inequality isn’t helpful. There will always be some inequality caused by random events that a government can do little if anything to eliminate. So the Gini probably isn’t the right thing to look at.

One part of inequality we can all agree matters is the part associated with family circumstances. After all, most – if not all – of us would agree with the statement that inequalities in education and health that are systematically associated with a child’s family circumstances are unfair. So instead of measuring total inequality, we would measure differences between in education and health outcomes between, say, the poorest 40% and the rest of the population.

Do we need a separate target for this type of inequality? Klasen says No because progress over time will necessarily involve the poor catching up.

We can test Klasen’s hypothesis using a new dataset from Caryn Bredenkamp and her team at the World Bank (full disclosure: I’m a member of the team). The maps below give a sneak preview of the findings of the team’s ongoing analytic work on the MDGs. In the maps I’ve compared – for each indicator – the annual growth among the poorest 40% of the population with the annual growth among the richest 60% of the population. (I calculated the growth rates using only the first and last available surveys.) Green means the outcome is improving faster for the poorest 40% than for the richest 60%; red means the opposite. The deeper the green, the faster the poor are catching up; the deeper the red, the faster the rich are pulling even further ahead. (By the way just in case you were wondering, green on the mortality and underweight maps means mortality and underweight are falling faster among the poorest 40%.)

What’s striking is that in each map there are several red countries – and not just in Africa. In just over half of the countries, the poorest 40% have actually been making slower progress than the richest 60% on under-five mortality and child malnutrition. This is quite shocking. It’s perhaps even more shocking that in around one quarter of countries the poor are making slower progress on indicators like antenatal care, safe deliveries, and immunization, all of which can be influenced fairly directly by governments, NGOs, and donors.
For health, at least, an inequality goal is needed

So from these maps it seems that it’s not actually true that progress at the population level will automatically entail faster progress among the poor. If inequalities in education and health outcomes across the income distribution matter, and if we want to see “prosperity” in its broadest sense shared, it looks like we really do need an explicit goal that captures inequality. It seems inequality will be busy for a while yet.



Adam Wagstaff

Research Manager, Development Research Group, World Bank

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