Inequality: education as the first remedy.

Author:Hadjian, Avedis
Position:WORLD ECONOMIC FORUM: INEQUALITY
 
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In the last decade, Latin America has made strides in the fight against inequality. For the first time, the poor, on average, are no longer the biggest population in the region, thanks to the growth of a middle class that now averages between 40 percent and 70 percent in Latin American countries.

Even though there are signs that point to some stalling, income inequality has steadily come down in Latin America in the last decade. According to the United Nations Development Programme (UNDP), in the 2000s, the gap shrank in 14 out of 17 countries for which there is comparable data. Poverty (defined as an income of $4.00 a day) fell from 41.5 percent in 2000 to 29.6 percent in 2010.

For all the progress, however, by most measures, Latin America remains the most unequal region in the world. The Gini coefficient--the most common standard to measure income differences, in which 0 is absolute equality and 1 absolute inequality--declined from a weighted average of 0.549 in the late 1990s for household per capita income to 0.498 in the late 2000s. That is faster progress than elsewhere. But compare it to Scandinavia's Gini of 0.25, which makes it the most equal region in terms of income.

Data strongly suggests that two factors explain the trend towards income convergence in Latin America:

* The reduction in hourly labor income inequality

* Bigger and growing government transfers

A paper prepared by Evridiki Tsounta and Anayochukwu Osueke for the International Monetary Fund proposes that GDP growth and a set of policies explain the decline in inequality in the region. But evidence indicates that the fight against inequality was spearheaded by investments in education.

"In general terms, our analysis suggests that, on average, well-targeted education spending has been...

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