HUMANITY DIVIDED Confronting inequality in
Developing Countries Almudena Fernandez, Bureau for Policy and Programme Support, UNDP Dialogue on Inequality, Istanbul 21 January 2015

1 OUTLINE 1 Conceptual Framework
2 Inequality in developing countries: what has happened and why 3 Policy framework

TAKING THE DEBATE FORWARD Outcomes
and opportunities are not independent but in fact are highly interdependent Although inter-dependent, inequality of outcomes and opportunities have different underlying drivers horizontal inequalities are of special concern as they tend to be very stubborn and persistent over time.

4/27/2015 Footer Text 4 ?
INEQUALITY: WHAT HAS HAPPENED AND WHY

INCOME INEQUALITY CHANGES IN DEVELOPING
COUNTRIES -7% 0% 13% 35% -5% 11% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% Africa Arab Asia& Pacific E&CIS Latin America& Caribbean Developing countries Change% Income Inequality Trends by Region Population-weighted Average Change in the Gini Index ( Early 1990s to Late 2000s) • Income Inequality rose by 35% in Eastern Europe and the CIS and 13% in the Asia the Pacific • Meanwhile, it fell in both Sub- Saharan Africa by 7% and in the Latin America and Caribbean region by 5%. Source: UNDP, Humanity Divided

ECONOMIC PERFORMANCE AND INCOME INEQUALITY
8% 17% -3% 25% 21% -7% 1% -10% -5% 0% 5% 10% 15% 20% 25% 30% Low-income (No change) Low-income (Moved to lower middle) Lower-middle income (No change) Lower-middle income (Moved to upper middle) Lower-middle income (Moved to high-income) Upper-middle income (No change) Upper-middle income (Moved to high-income) Change% Income Status Groups Income Inequality Trends by Income Group Population-weighted Average Change in the Gini Index ( Early 1990s to Late 2000s) Source: UNDP, Humanity Divided LOW INCOME LOWER-MIDDLE INCOME UPPER-MIDDLE INCOME

DRIVERS OF INCOME INEQUALITY Technical
Change Financial and trade globalization Domestic policies

 Not every country that
had above average growth during this period saw inequality rise. And not every country with below average growth saw inequality fall.  In the last 20 years, of 24 developing countries with above average growth (3% or more), 11 countries experienced an increase in inequality but 13 countries were able to maintain or lower inequality. DO WE HAVE TO SACRIFICE FASTER GROWTH FOR GREATER EQUITY?

THE REDISTRIBUTIVE IMPACT OF FISCAL
POLICY IN DEVELOPING COUNTRIES -20% -10% 0% 10% 20% 30% 40% 50% Upper-middle Lower-middle Low ChangeinInequality(%) Income group Change in the Gini Index of Income Inequality Post-Taxes and Transfers (Late 2000s) • In the majority of countries, taxes and transfers had an inequality reducing effect. • The average redistributive impact of taxes and transfers was 11% in Upper-Middle Income countries, 4% in Lower-Middle and 3% in Low- Income countries. • Yet, country experiences vary widely. Even among low and lower middle income countries there are cases where taxes and transfer reduce inequality by more than 30% Source: UNDP, Humanity Divided

INCOME INEQUALITY IS RELATED TO
INEQUALITY IN WELL-BEING 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 Sub-Saharan Africa Middle East South Asia East Asia Latin America & Caribbean Ratioofoutcomesbyquintile Health and nutrition outcomes Ratio of top to bottom wealth quintiles (late 2000s) Under-5 Mortality Rates Stunting Rates Female Malnourishment • Under-5 mortality rates are higher by more than 50% for children in the bottom wealth quintile as compared to children in the top wealth quintile, in all regions • Women from the bottom wealth quintile are up to 9 times more likely to be malnourished compared to women from the top wealth quintile Source: UNDP, Humanity Divided

• Gender inequality has declined
for some indicators. • The F/M ratio of total years of education increased, on average, from 82% in 1990 to 91% in 2010. • The global ratio of F/M employment rates rose from 62% in 1990 to 70% in 2010. • Exception: • Worsening job segregation in industrial sector. • Wage gaps remain large and widening in many countries. 4/27/2015 Footer Text 11 GENDER INEQUALITY

Reasons to be concerned about
trends. • Employment equality substantially lags educational improvements. • Closing educational gaps not sufficient in order to achieve gender equality. • Gaps in political representation remain wide. Public policy does not reflect women’s life conditions and perspective in allocation of resources. 4/27/2015 Footer Text 12 GENDER INEQUALITY

4/27/2015 Footer Text 13 ?HOW
TO ADDRESS INEQUALITY

A COMPREHENSIVE POLICY FRAMEWORK

You can download the report
at: http://on.undp.org/vLKqj 4/27/2015 Footer Text 15 THANK YOU