PEGNet Conference

Measures to reduce inequality

by Sabine Balk

In brief

Spatial inequality causes tensions: informal settlement in front of regular housing in Nairobi.

Spatial inequality causes tensions: informal settlement in front of regular housing in Nairobi.

Economic growth has reduced absolute poverty in many developing countries. Nonetheless, the distribution of wealth remains strikingly unequal in many places. This challenge is obvious not only in developing countries and emerging markets: inequality is increasing in industrialised nations too. Development economists are interested in this issue. They are doing research on how to identify and reduce vari­ous forms of inequality. These issues were on the agenda of this year’s PEGNet conference in Zurich.

PEGNet is the Poverty Reduction, Equity and Growth Network. It links academic institutes to development agencies. The goal is to facilitate synergies. Inequality is a complex issue and harder to reduce than poverty, says Isabel Günther from the NADEL Center for Development and Cooperation, which belongs to ETH, an elite university based in Zurich. Fighting inequality is always linked to redistribution, she told conference participants. 

Giovanni Andrea Cornia from the University of Florence has been researching inequality for many years.  According to him, there have been many setbacks, for example in rural India. However, he also sees some progress, for example in Latin America. Cornia recently prepared a study on sub-Saharan Africa on behalf of the UN Development Programme (UNDP). It assesses how inequality has developed in 39 countries from 1990 to 2011. 

Cornia reports that 40 % of the people living south of the Sahara live in 17 countries with declining inequality, whereas inequality has become more pronounced for the 60 % who live in 12 other countries. The majority of the people are thus experi­encing more inequality.

As Cornia points out, all countries recorded economic growth and reduced absolute poverty, but wealth has not been spread more evenly.  The main problem, according to the economist, is an unhealthy pattern of growth. The most successful sector was extractive industries, which do not improve the lot of most people.

Cornia considers four core issues to be the main drivers of inequality:

  • fast population growth,
  • poor secondary education and inadequate vocational training,
  • a lack of redistributive policies through taxes and contributions to social-protection schemes and
  • violent conflict.

According to the scholar’s insights, the following policy measures can make a difference:  

  • Public investments in social protection schemes and cash-transfer programmes. In Ethiopia, for example, donor-funded social-protection schemes had immediate impacts, Cornia says.  
  • Investments in public education. Such measures have an impact within five to ten years and particularly benefit poor children, according to the Italian economist.
  • Improving agriculture. Cornia wants yields to increase and land to be distributed more equitably.
  • Promoting family planning in order to reduce birth rates. This approach pays off within one or two generations, the scholar argues.  

Samuel Kofi Tetteh-Baah is from Ghana and currently preparing his PhD thesis at NADEL. He is researching inequality within social groups who share an ethnic identity or religious faith. He is using data from 36 countries concerning the years 1990 to 2015. Tetteh-Baah is particularly interested in four indicators:

  • achievements in education,
  • prosperity,
  • children’s growth (stunting) and
  • child mortality.

Tetteh-Baah reports that inequality within groups is generally declining. Children’s physical development and mortality tend to be rather homogenous. He has found out that, within a group, people consider unfair distribution of land and urban space especially irritating. Ethnic inequality is accepted more readily, and people do not seem to bother much about religious and gender inequality.

While inequality in terms of education and wealth is being reduced within groups, it is still quite prominent in African societies in general. Tetteh-Baah argues that in spite of considerably improved standards of living, spatial and ethnic inequality remain major issues in Africa.

Jon Jellema is an economist from Tulane University in New Orleans. He is researching what impacts tax policies have on poverty and inequality. The guiding question is how taxes can serve to redistri­bute wealth and reduce poverty. He works for Tulane’s Commitment to Equity Institute (CEQ), which has published a handbook on these matters. The book is based on studies concerning the tax policies of 20 different countries. Jellema argues that government revenues and government expenditures must be seen in context. The reason is that the benefits of governments spending can outweigh the negative impact of taxes. Accordingly, even regressive taxes which affect poor households more than the prosperous ones, can help to reduce inequality, provided the revenue is used prudently. 

Jellema says that direct taxes (such as income taxes) always contribute to making societies more equal, and the same is true of public investments in health and education. Indirect taxes (sales taxes, for example), can also help to reduce inequality if the money is invested in sensible programmes.

The annual PEGNet conference is one of the few occasions that convene people from both academia and development agencies. Participants in Zurich agreed that more bridge-building of this kind would be useful. Some practitioners bemoaned however that scholars’ insights tend to be rather theoretical and do not provide much guidance for tangible action.

 
Link
Commitment to Equity Institute: Handbook.
http://www.commitmentoequity.org/publications-ceq-handbook/

e-Paper no. 11 2017, 2017/11, Page 10

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