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López-Calva, Luis-Felipe
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Poverty Global Practice, The World Bank
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January 31, 2023
Publication Search Results
1 - 10 of 19
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Publication
The Unfairness of (Poverty) Targets
(World Bank, Washington, DC, 2013-02)Adopted on September 8, 2000, the United Nations Millennium Declaration stated as its first goal that countries "...[further] resolve to halve, by the year 2015, the proportion of the world's people whose income is less than one dollar a day and the proportion of people who suffer from hunger..." Each country committed to achieve the stated goal, regardless of their initial conditions in terms of poverty and inequality levels. This paper presents a framework to quantify how much initial conditions affect poverty reduction, given a level of "effort" (growth). The framework used in the analysis allows for the growth elasticity of poverty to vary according to changes in the income distribution along the dynamic path of growth and redistribution, unlike previous examples in the literature where this is assumed to be constant. While wealthier countries did perform better in reducing poverty in the last decade and a half (1995-2008), assuming equal initial conditions, the situation reverses: the paper finds a statistically significant negative relation between initial average income and poverty reduction performance, with the poorest countries in the sample going from the worst to the best performers in poverty reduction. The analysis also quantifies how much poorer countries would have scored better, had they had the same level of initial average income as wealthier countries. The results suggest a remarkable change in poverty reduction performance, in addition to the reversal of ranks from worst to best performers. The application of this framework goes beyond poverty targets and the Millennium Development Goals. Given the widespread use of targets to determine resource allocation in education, health, or decentralized social expenditures, it constitutes a helpful tool to measure policy performance toward all kinds of goals. The proposed framework can be useful to evaluate the importance of initial conditions on outcomes, for a wide array of policies. -
Publication
Deconstructing the Decline in Inequality in Latin America
(World Bank, Washington, D.C, 2013-07)Inequality in Latin America unambiguously declined in the 2000s. The Gini coefficient fell in 16 of the 17 countries where there are comparable data, and the change was statistically significant for all of them. Existing studies point to two main explanations for the decline in inequality: a reduction in hourly labor income inequality, and more robust and progressive government transfers. Available evidence suggests that it is the skill premium -- or, more precisely, the returns to primary, secondary, and tertiary education vs. no schooling or incomplete primary schooling -- that drives the decline in hourly labor income inequality. The causes behind the decline in returns to schooling, however, have not been unambiguously established. Some studies find that returns fell because of an increase in the supply of workers with more educational attainment; others, because of a shift in demand away from skilled labor. -
Publication
Crime and Growth Convergence : Evidence from Mexico
(World Bank, Washington, DC, 2013-12)Scholars have often argued that crime deters growth, but the empirical literature assessing such effect is scarce. By exploiting cross-municipality income and crime data for Mexico -- a country that experienced a high increase in crime rates over the past decade -- this study circumvents two of the most common problems faced by researchers in this area. These are: (i) the lack of a homogenous, consistently comparable measure of crime and (ii) the small sample problem in the estimation. Combining income data from poverty maps, administrative records on crime and violence, and public expenditures data at the municipal level for Mexico (2005-2010), the analysis finds evidence indicating that drug-related crimes indeed deter growth. It also finds no evidence of a negative effect on growth from crimes unrelated to drug trafficking. -
Publication
Shared Prosperity : Paving the Way in Europe and Central Asia
(Washington, DC: World Bank, 2014-04-09)The World Bank has recently defined two strategic goals: ending extreme poverty and boosting shared prosperity. Shared prosperity is measured as income growth among the bottom 40 percent of the income distribution in the population. The two goals should be achieved in a way that is sustainable from economic, social, and environmental perspectives. Shared Prosperity: Paving the Way in Europe and Central Asia focuses on the second goal and proposes a framework that integrates both macroeconomic and microeconomic elements. The macro variables, particularly changes in relative prices, affect income growth differentially along the income distribution; at the same time, the microeconomic distribution of assets at the bottom of the distribution determines the capacity of the bottom 40 to take advantage of the macroeconomic environment and contribute to overall growth. Growth and the incidence of growth are thus understood as jointly determined processes. Besides this integration, the main input of the framework is the finding that the trade-off between growth and equity may be an issue only in the short run. Over the long run, redistribution policies that increase the productive capacity of the bottom 40 percent enhance the overall growth potential of the economy. This report considers shared prosperity in Europe and Central Asia and concludes that the performance in sharing prosperity during the period 2000–10 was good, on average, but heterogeneous across countries and that sustainability is unclear. It also describes examples of the application of the framework to selected countries in the region. Finally, the report provides a tool to structure the policy discussion around the goal of shared prosperity and explains that specific policy links associated with the goal can be established only after a thorough analysis of the country-specific context. -
Publication
Exiting Belindia? Lesson from the Recent Decline in Income Inequality in Brazil
(World Bank, Washington, DC, 2012)After decades of persistent disparities, inequality in Brazil has fallen steadily over the last fifteen years. This robust rate of decline has surpassed the pace of the Latin American region as a whole, and is taking place as inequality rises in several rapid-growth emerging economies in other regions. This document examines the recent trend in income inequality in Brazil, its key policy drivers and some of the challenges ahead. It aims at capturing some of the lessons behind Brazil?s experience to share with other economies in the region and beyond. -
Publication
Economic Mobility and the Rise of the Latin American Middle Class
(Washington, DC: World Bank, 2013)After decades of stagnation, the size of Latin America's middle class recently expanded to the point where, for the first time ever, the number of people in poverty is equal to the size of the middle class. This volume investigates the nature, determinants and possible consequences of this remarkable process of social transformation. We propose an original definition of the middle class, tailor-made for Latin America, centered on the concept of economic security and thus a low probability of falling into poverty. Given our definition of the middle class, there are four, not three, classes in Latin America. Sandwiched between the poor and the middle class there lies a large group of people who appear to make ends meet well enough, but do not enjoy the economic security that would be required for membership of the middle class. We call this group the 'vulnerable'. In an almost mechanical sense, these transformations in Latin America reflect both economic growth and declining inequality in over the period. We adopt a measure of mobility that decomposes the 'gainers' and 'losers' in society by social class of each household. The continent has experienced a large amount of churning over the last 15 years, at least 43% of all Latin Americans changed social classes between the mid 1990s and the end of the 2000s. Despite the upward mobility trend, intergenerational mobility, a better proxy for inequality of opportunity, remains stagnant. Educational achievement and attainment remain to be strongly dependent upon parental education levels. Despite the recent growth in pro-poor programs, the middle class has benefited disproportionally from social security transfers and are increasingly opting out from government services. Central to the region's prospects of continued progress will be its ability to harness the new middle class into a new, more inclusive social contract, where the better-off pay their fair share of taxes, and demand improved public services. -
Publication
Declining Inequality in Latin America in the 2000s : The Cases of Argentina, Brazil, and Mexico
(World Bank, Washington, DC, 2012-10)Between 2000 and 2010, the Gini coefficient declined in 13 of 17 Latin American countries. The decline was statistically significant and robust to changes in the time interval, inequality measures, and data sources. In-depth country studies for Argentina, Brazil, and Mexico suggest two main phenomena underlie this trend: a fall in the premium to skilled labor and more progressive government transfers. The fall in the premium to skills resulted from a combination of supply, demand, and institutional factors. Their relative importance depends on the country. -
Publication
Income Inequality and Violent Crime : Evidence from Mexico's Drug War
(World Bank, Washington, DC, 2014-06)The relationship between income inequality and crime has attracted the interest of many researchers, but little convincing evidence exists on the causal effect of inequality on crime in developing countries. This paper estimates this effect in a unique context: Mexico's Drug War. The analysis takes advantage of a unique data set containing inequality and crime statistics for more than 2,000 Mexican municipalities covering a period of 20 years. Using an instrumental variable for inequality that tackles problems of reverse causality and omitted variable bias, this paper finds that an increment of one point in the Gini coefficient translates into an increase of more than 10 drug-related homicides per 100,000 inhabitants between 2006 and 2010. There are no significant effects before 2005. The fact that the effect was found during Mexico's Drug War and not before is likely because the cost of crime decreased with the proliferation of gangs (facilitating access to knowledge and logistics, lowering the marginal cost of criminal behavior), which, combined with rising inequality, increased the expected net benefit from criminal acts after 2005. -
Publication
Equity for Sustained Growth: Pernambuco State Equity Assessment
(World Bank, Washington, DC, 2014-06-04)Starting from the aggregate, this report first describes how Pernambuco has fared with respect to the rest of Brazil, both in terms of economic and social welfare performance, over the last decade (2001-2012). In a context of widespread economic growth, Pernambuco has done particularly well in recent years, similar to or above the national average. A key challenge concerns the longer-term, where – notwithstanding the positive performance of recent years-the same level of growth may not be as easily sustained. The solid economic performance has been reflected in an improvement of social indicators, also associated with the governments interiorizacao strategy, a policy developed explicitly to increase the coverage of public services in underserved areas, with a focus on the interior of the state. The decline in poverty rates displays a trajectory towards convergence with Brazil and recently, a faster than national decline of the Gini has brought Pernambucos income inequality below the national and Northeast level. -
Publication
A Vulnerability Approach to the Definition of the Middle Class
( 2011-12-01)Measurement of the middle class has recently come to the center of policy debate in middle-income countries as they search for the potential engines of growth and good governance. This debate assumes, first, that there is a meaningful definition of class, and second, that thresholds that define relatively homogeneous groups in terms of pre-determined sociological characteristics can be found empirically. This paper aims at proposing a view of the middle class based on vulnerability to poverty. Following this approach the paper exploits panel data to determine the amount of comparable income -- associated with a low probability of falling into poverty -- which could define the lower bound of the middle class. The paper looks at absolute thresholds, challenging the view that people above the poverty line are actually part of the middle class. The estimated lower threshold is used in cross-section surveys to quantify the size and the evolution of middle classes in Chile, Mexico, and Peru over the past two decades. The first relevant feature relates to the fact that the proposed thresholds lie around the 60th percentile of the distribution. The evidence also shows that the middle class has increased significantly in all three countries, suggesting that a higher number of households face lower probabilities of falling into poverty than they did in the 1990s. There is an important group of people, however, which cannot be defined as middle class from this perspective, but are not eligible for poverty programs according to traditional definitions of poverty.