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 2008 Inter-American Development Bank Gustavo Márquez, RES. General Coordinator Alberto Chong, RES; Suzanne Duryea, RES; Jacqueline Mazza, SCL; Hugo Ñopo, RES

2 Three main messages Social exclusion is a phenomenon associated with, but very different from poverty. Social exclusion is a phenomenon associated with, but very different from poverty. Social exclusion have significant economic costs than can be measured. Social exclusion have significant economic costs than can be measured. Advancing social inclusion calls for public policies that go beyond poverty alleviation programs. Advancing social inclusion calls for public policies that go beyond poverty alleviation programs.

Social exclusion is a phenomenon associated with, but very different from poverty.

4 Social Exclusion … Nature Nature –Is a social, political and economic dynamic that blocks group and individual access to resources and opportunities, thus limiting their ability to obtain outcomes valuable in a market economy. Mechanisms Mechanisms –Operates through formal and informal institutions that reduce the liberty and functioning of the excluded, reducing their well-being. Results Results –Affects the attainment of income, consumption, and political and social participation by the excluded. Increase transaction costs and hinders governance agreements for society as a whole.

5

Discrimination, Stigmatization and Group Identity The Traditional Forms of Exclusion

7 Who is Discriminated Against?

8 Why Are They Discriminated Against?

9 Beyond Perceptions Perceptions are relevant only to the extent that they affect the decisions, actions and outcomes of individuals. Perceptions are relevant only to the extent that they affect the decisions, actions and outcomes of individuals. There is a notorious difference in wage levels across different groups (gender, ethnic, racial). There is a notorious difference in wage levels across different groups (gender, ethnic, racial). However, the literature on wage differentials reveal that almost half of the wage difference is explained by different human capital endowments. However, the literature on wage differentials reveal that almost half of the wage difference is explained by different human capital endowments.  The evidence of discrimination, as shown by wage differentials unexplained by individual characteristics, is notably less than that arising from the simple comparison of wage levels.

10 Results and Processes The region is extremely unequal, but discrimination is not the only cause of inequality. The confusion between relative deprivation and discrimination is one of the fundamental deficits in the literature. The region is extremely unequal, but discrimination is not the only cause of inequality. The confusion between relative deprivation and discrimination is one of the fundamental deficits in the literature. The design of policies of social inclusion depends on our capacity to understand the processes through which social exclusion is produced and reproduced, and to look beyond solely traditionally excluded groups. The design of policies of social inclusion depends on our capacity to understand the processes through which social exclusion is produced and reproduced, and to look beyond solely traditionally excluded groups.

Democratization, Macro Stabilization, Globalization and Changes in the Patterns of Inclusion and Exclusion The Modern Forms of Exclusion

12 Inclusion in Some Grounds for Some Groups

13 Changes in the Trend in Informal Employment

14 Inclusion: Education and Health

15 Exclusion: Pensions

16 Low-Wages and Exclusion

17 The Number of Low-Wage Jobs has Grown in Most Countries in the Region

18 Education and Low-Wage Jobs

19 Female Labor Force Participation and Low-Wage Jobs

20 Economic Fluctuations Cannot Fully Explain the Increases in the Incidence of Low-Wage jobs

21 The Incidence of Low-Wage Jobs has Increased in All Sectors

22 Increasing Female Participation

23 Mobility and Exclusion The little we know about social mobility in the region suggests that it is unlikely that the majority of individuals will see significant improvements in their social or economic position within their lifetimes or that of their children. The little we know about social mobility in the region suggests that it is unlikely that the majority of individuals will see significant improvements in their social or economic position within their lifetimes or that of their children. This aggravates the consequences of exclusions and creates intergenerational transmissions of socio-economic disadvantages. This aggravates the consequences of exclusions and creates intergenerational transmissions of socio-economic disadvantages. Improving mobility requires equal opportunities and actions directed at changing the processes that generate social immobility. Improving mobility requires equal opportunities and actions directed at changing the processes that generate social immobility.

Social exclusion have significant economic costs than can be measured.

25 Cooperation, Social Distance and Exclusion Within the problem of exclusion is the problem of lack of confidence, limiting collective action and cooperation. Within the problem of exclusion is the problem of lack of confidence, limiting collective action and cooperation. With a number of economic experiments, applied to representative samples of 6 capital cities in the region, we explored questions such as: To what extent do Latin Americans collaborate with each other? What role does social distance play in the determination of these egoistic or cooperative behaviors ? With a number of economic experiments, applied to representative samples of 6 capital cities in the region, we explored questions such as: To what extent do Latin Americans collaborate with each other? What role does social distance play in the determination of these egoistic or cooperative behaviors ? What do We Find?...

26 Cooperation and Social Distance

27 Heterogeneity and Confidence

28 What do We Find? The limitations of trust and cooperation imply friction in markets and increased transaction costs. As a result, market efficiency and value generation are reduced. The limitations of trust and cooperation imply friction in markets and increased transaction costs. As a result, market efficiency and value generation are reduced. Our experiments found that increases in trust and cooperation among Latin Americans could imply gains in the generation of social product that range from 20% to 70%. Our experiments found that increases in trust and cooperation among Latin Americans could imply gains in the generation of social product that range from 20% to 70%.

Advancing social inclusion calls for public policies that go beyond poverty alleviation programs.

30 Public Policy and Social Inclusion Inclusion is not a policy objective, but a societal process that public policy can stimulate. Inclusion is not a policy objective, but a societal process that public policy can stimulate. Exclusion is a multi-dimensional, changing and dynamic phenomenon. Social inclusion shares these characteristics. Exclusion is a multi-dimensional, changing and dynamic phenomenon. Social inclusion shares these characteristics. The policies of inclusion are a dynamic process to promote social, economic and cultural equality, fighting discrimination, and increasing diversity. The policies of inclusion are a dynamic process to promote social, economic and cultural equality, fighting discrimination, and increasing diversity.

31 Inclusion and Public Policy Inclusion changes outcomes and the processes through which people obtain them. Changes in the environment of and access to institutions are crucial. Inclusion changes outcomes and the processes through which people obtain them. Changes in the environment of and access to institutions are crucial. Inclusion is a range of advances in different areas in varying moments. Inclusion is a range of advances in different areas in varying moments. The process of inclusion is dynamic and multi-dimensional: changes in education are necessary, but not sufficient, nor substitutes for changes in other dimensions (ie: labor market). The process of inclusion is dynamic and multi-dimensional: changes in education are necessary, but not sufficient, nor substitutes for changes in other dimensions (ie: labor market).

32 In Summary Social exclusion is a phenomenon associated with, but different than poverty. Inclusion requires different public policies than those traditionally used to combat poverty. Social exclusion is a phenomenon associated with, but different than poverty. Inclusion requires different public policies than those traditionally used to combat poverty. Social exclusion has significant economic costs. Advances in social inclusion reduce transaction costs and facilitate the achievement of governance agreements. Social exclusion has significant economic costs. Advances in social inclusion reduce transaction costs and facilitate the achievement of governance agreements. Progress in the process of inclusion requires fundamental changes in the ways institutions are managed and in the design, analysis and implementation of public policies. Progress in the process of inclusion requires fundamental changes in the ways institutions are managed and in the design, analysis and implementation of public policies.