1) Shifting wealth in developing countries over recent decades has brought both opportunities and risks for social cohesion. While some countries have seen significant economic growth and reductions in poverty, inequalities have also increased in many places. 2) Maintaining social cohesion during periods of rapid growth requires proactive policy measures. Key policy areas include fiscal policy, employment and labor market institutions, social protection, health, education and ensuring participation in policymaking. 3) Policy reviews of social cohesion can help countries assess current status, monitor progress, and improve policy coordination across areas like fiscal, employment, education and social policies to foster more inclusive growth and shared prosperity.

1. Perspectives on Global Development 2012
Social Cohesion in a Shifting World
Mario Pezzini
Director, OECD Development Centre
Joint Policy Dialogue with Global Development Network
New Delhi, India, 15 October 2012

2. A success story?
• A lower-middle income country
• Average 5% annual growth rate since 1990
• Nearly 100% primary enrolment in 2008
• 80% health care coverage
• ‘Prudent public debt management’ (42.8% of GDP in 2009)
• 3% fiscal deficit
• Inflation at approx. 3% in the 2000s

3. Tunisia
Source: OECD/AfDB/UNECA (2010), African Economic Outlook.

4. Main messages
1. As economic uncertainty deepens, now is the time for developing countries to
channel their recent prosperity into a more ambitious social cohesion agenda.
2. The process of rapid growth in many developing countries presents both a chance
and risks for social cohesion.
3. It’s not only about what you do but also about how you do it. A social cohesion
policy agenda calls for different priorities in policy making.

5. Outline
1 Shifting Wealth: an unprecedented opportunity?
2 Challenges for social cohesion in fast growing countries
3 What policies for social cohesion?
4 Looking Forward – Social Cohesion Policy Reviews

6. The four-speed world in the 1990s
Source: OECD Development Centre, Perspectives on Global Development 2010 - Shifting Wealth

7. The four-speed world in the 2000s
Source: OECD Development Centre, Perspectives on Global Development 2010 - Shifting Wealth

8. Shifting Wealth:
New resources for development
Greater fiscal space in the 2000s vis-à-vis the 1990s
Fiscal revenue to GDP ratio (%)
Source: Authors’ calculations based on World Bank (2011).

9. Outline
1 Shifting Wealth: an unprecedented opportunity?
2 Challenges for social cohesion in fast growing countries
3 What policies for social cohesion?
4 Looking Forward – Social Cohesion Policy Reviews

10. Growth in life satisfaction and
income do not necessarily coincide
Annualised growth rates (%), 2006-2010
Sources: Authors‘ calculation based on Gallup World Poll (2010) and World Development Indicators.

11. The aspirations of the emerging middle class
Source: Author’s calculation based on Kharas (2010).

12. Capturing social cohesion dimensions
- a dashboard of indicators
Social inclusion Social capital Social mobility
• Absolute and relative poverty • Interpersonal trust • Perceived ability to advance
• Inequalities – distributional • Civic participation • Intergenerational mobility
discontents

13. Outline
1 Shifting Wealth: an unprecedented opportunity?
2 Challenges for social cohesion in fast growing countries
3 What policies for social cohesion?
4 Looking Forward – Social Cohesion Policy Reviews

14. Policies can make a difference for inequality
Gini coefficients before and after taxes and transfers in Latin American countries
Source: OCDE (2008a) for OECD countries excluding LAC, OECD (2008b) for Argentina, Brazil Colombia and Peru.

15. Social and economic policy
across the distribution in Brazil
Growth incidence curve (2001-06) Real minimum wage (in end 1994 R$)
Source: OECD Development Centre, Perspectives on Global
Source: IBGE and Central Bank of Brazil
Development 2012.

16. Key policy areas for social cohesion
- Example 1: Fiscal policy -
With higher trust, tax evasion is less acceptable…
Source: Authors' calculations based on World Value Surveys and Indices of Social Development.

17. Key policy areas for social cohesion
- Example 1: Fiscal policy -
…which in turns leads to higher revenues…
Source: Authors' calculations based on World Value Surveys, OECD.stat, OECD/ECLAC/CIAT

18. Key policy areas for social cohesion
- Example 2: Social protection -
The ‘missing middle’ in Brazil, 2006
Share of the working population by income quintile and labour status
Source: da Costa et al. (2011).

19. Key policy areas for social cohesion
- Example 3: Employment and labour institutions -
Increase in labour disputes in China
Number of cases (thousand)
Source: Cai and Wang (2011).

20. Labour markets:
Reforming labour institutions (China)
Reponses: increase in minimum wages… …and wider use of collective bargaining
Source: Authors’ calculations based on Du and Pan (2009) and CASS. Source: Cai and Wang (2011).

21. Outline
1 Shifting Wealth: an unprecedented opportunity?
2 Challenges for social cohesion in fast growing countries
3 What policies for social cohesion?
4 Looking Forward – Social Cohesion Policy Reviews

22. Summary and Looking forward
 Shifting wealth brings opportunities and risks
 Social cohesion as a means and an end
 More resources and unprecedented possibilities
 New opportunities not equally shared within countries
 Looking forward
 Remaining questions: evolution of worldwide economic environment, sustainability and social
cohesion, global governance.
 How to make social cohesion a part of national development strategies?
Implementing Social Cohesion Policy Reviews.

23. Objectives of the
Social Cohesion Policy Reviews (SCPRs)
1. Assess the status of social cohesion in a society and monitor progress over time.
2. Improve the contribution of public policies to fostering social cohesion.
• Within selected policy areas
• By improving policy co-ordination
3. Gather comparable analysis to foster policy dialogue
(In the mid-to-long term)

24. What’s new?
– Analyse the impact of policies on social cohesion
• rather than growth, poverty reduction or line ministry objectives
– A multi-sectoral approach
– Diagnostic rather than prescriptive

25. Contents of the review
i. Measuring social cohesion
i. Social inclusion
ii. Social capital
iii. Social mobility
ii. Assessing the need for policy changes
i. Fiscal Policy
ii. Labour market policy
iii. Social protection, health and other social policies
iv. Education
iii. Improving the governance of social cohesion
i. Civic participation
ii. Mechanisms for horizontal and vertical policy coordination
iii. Local governance

26. Thank you for your attention!
OECD Development Centre
More information:
www.oecd.org/dev/pgd
webnet.oecd.org/pgdexplorer
www.oecd.org

27. Annexes

28. The Centre’s Membership
OECD members: Non-OECD members:
24 countries 17 countries
Poland Brazil Morocco
Austria Ireland
Belgium Israel Portugal Colombia Peru
Costa Rica Romania
Chile Italy Slovakia
Dominican
South Africa
Czech republic Korea Spain Republic
Egypt Thailand
Finland Luxembourg Sweden
India Viet Nam
France Mexico Switzerland
Indonesia Senegal
Germany Netherlands Turkey
Mauritius Cape Verde
Iceland Norway United Kingdom
Argentina
The World Bank, the African Development Bank and the International Monetary Fund
are all observers. The European Union also takes part in the work of the Governing
Board.

29. Producing analysis on key development issues
Regional outlooks Thematic outlook
Africa Latin America Southeast Asia
Global
African Economic Outlook Latin American Economic Outlook Southeast Asian Economic Outlook Perspectives on Global
Development
- 2010: Public Resource Mobilisation - 2010: Fiscal Policies - 2010: Transport Infrastructure
- 2011: Emerging Partners - 2011: Middle Classes - 2011/2012: Green Growth - 2010: Shifting Wealth
- 2012: Youth employment - 2012: State Reform - 2013: Narrowing development gaps - 2012: Social Cohesion
- 2013: Industrial Policies

30. Perspectives on Global Development
 Trilogy through the lens of Shifting Wealth:
1. Shifting Wealth
2. Social Cohesion in a Shifting World
3. Industrial policies
 Consultation process:
• Expert meeting co-organized with GIZ (April 2010)
• International Conference in Paris (January 2011)
• Regional consultations (Rabat, April 2011 and Bangkok, July 2011)
 Partners:
• FIIAPP, GIZ, Haut Commissariat au Plan (Morocco),
Ministry of Foreign Affairs (Thailand)

31. What policies for social cohesion?
• Policies can make a difference
• Key areas: Fiscal, employment, social and educational policies
• A social cohesion agenda is a more ambitious social agenda:
Poverty reduction + increased attention to vulnerable middle class + inclusive policies
• Exploiting linkages between different policies is crucial:
Policy coherence and co-ordination

32. Distinct policies and growth models:
Impact on inequality
Changes in the Gini index in the BRICS, 1990-2007
Source: World Bank (2010) for Brazil, Russia, India's 2005 data, and South Africa; OECD (2010) for China. World Bank (2004) for
India's 2000 data.

33. Example 1:
Fiscal policy through the social cohesion lens
• Ensuring equal opportunities through more and better redistribution
• The virtuous cycle of fiscal legitimacy and social cohesion
With higher trust, tax evasion is less acceptable…
… which in turn leads to higher revenues
…and greater state capacity.
• Managing fiscal resources to create fiscal space
• Where to begin?
• Stronger, transparent and accountable tax administration
• Improving quality of public services

34. Example 2:
Social protection through the social cohesion lens
Social protection can do a lot for poverty reduction:
• Income support for the poor (e.g. Conditional Cash Transfers, workfare programmes)
• Extending social services such as health to the poor
A social cohesion agenda is a more ambitious social agenda
• Equality of opportunity (especially between groups)
• Avoid segmentation and dual systems
Dealing with the `missing middle’ to foster social cohesion
• Unbundling
• Universality

35. The how also matters
• Stop treating social cohesion as a by-product
• Long term view is needed
• Participation, capacity and accountability to make the policy
making process more inclusive.

36. Group inequalities combined with vertical inequality
Log adult-equivalent household income Per capita real public social expenditure
South Africa (ZAR) quintile (in ZAR, year 2000)
5000
0.6
4000
0.4
3000
0.2 2000
1000
0
2 4 6 8 10 12 0
Quintile 1 Quintile 2 Quintile 3 Quintile 4 Quintile 5
White Asian/Indian
1995 2000 2006
Coloured African
Source: Calculations based on SALDRU (2009).

37. Burundi
Guinea-Bissau
Congo Dem. Rep.
Sierra Leone
Ethiopia
Niger
Central Afr. Rep.
Malawi*
Liberia
Madagascar
Rwanda
Mozambique
Uganda
Guinea
Tanzania
Burkina Faso
Togo
Gambia
Mali
Comoros**
Ghana**
ODA per capita
Benin
AFRICAN MEDIAN
São Tomé & Principe
Côte d'Ivoire
Mauritania
Tax revenue per capita
Kenya
Cameroon
Source: OECD/AfDB/UNECA (2010), African Economic Outlook
Senegal
Zambia
Djibouti
Chad
Sudan
Lesotho
Egypt
Nigeria
AFRICAN AVERAGE
Morocco
Resources for development in Africa
Cape Verde
Tunisia
Swaziland
Namibia
Mauritius
Congo
South Africa
Botswana
Angola
Algeria
Gabon
Seychelles
Equatorial Guinea
Libya
0
400
800
1200
1600
2000
USD

38. …even accounting for differences in per capita income
Partial correlation between tax morale and tax effort in 2008
0.8 GHA
MDA
0.6 BGR BIH
UKR FRA
NOR MKD IRN
CYP MAR
Tax effort index 2008
0.4
MLI
FIN NDL
SVN
GBRITA
0.2 SWE
POL
ZAF EGY
URY
BOL PRY
ROU
0.0 ZMB VEN DEU ESP
HND BFA ARM
TTO
CHL GEO
-0.2 THA KOR
PER UGA USA PAK
SLV PHL CAN
DOM CHEIND
-0.4 SGP
GTM
CHN
-0.6
-0.8
-0.6 -0.4 -0.2 0.0 0.2 0.4 0.6
Tax evasion is never justifiable (fraction of respondents)
Source: PGD 2012