Revisiting the debate on inequality and economic

particularly in health, education, and consumption levels.”

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Revisiting the debate on inequality and development

particularly in health, education, and consumption levels.”
The first principle follows the literature on social justice and moral philosophy launched by Rawls, Sen, and others. It actually borrows much from
Roemer [1998]. The second principle incorporates the consensual poverty reduction objective of the international development community. However,
it may also be considered as referring to that specific opportunity which is to be free of the risk of falling into a poverty trap that would destroy most future opportunities. It may also betaken as the provision of some of the
“primary goods central to the argument in Rawls’ With such a definition, the key argument of the WDR 2006 was that equity matters more than income inequality for development, both intrinsically and instrumentally. More precisely, its main messages on the issue of inequality and development maybe summarized as follows It is the inequality of opportunity, including severe deprivation, and not necessarily the inequality of outcomes (e.g., income) that primarily hinders growth and poverty reduction As conceived in the report, equity included several of the channels reviewed earlier through which various types of inequality may negatively affect growth unequal access to credit, land, education, healthcare, jobs,
public decision making, security, a clean environment, and inequality in terms of inherited wealth, and of the social and family background in general. Although the correlation coefficient between income inequality and these various types of inequality—when they can be adequately measured—is generally positive, it is far from unity.
The theoretical argument in the report followed that of the literature summarized earlier in this paper. On the empirical side, the report leaned towards the body of partial indirect micro evidence. At the aggregate level,
the emphasis was put on the role of institutions in development and the inequality of opportunities implicit in weak institutions and predatory elites.
Interestingly, limited reference was made in the report to the mass of econometric literature on the aggregate relationship between growth and income inequality across countries. To be fully consistent with emphasizing equity ——— Revisiting the Debate on Inequality and Economic Development
REP 125 (5) septembre-octobre 2015
Document téléchargé depuis - Biblio SHS - - - 26/04/2016 h. © Dalloz

rather than income inequality as the key factor hindering growth, aggregate evidence should have been sought in cross-country comparisons using some measure of the inequality of opportunity and growth rates. However,
as will be shown later, such an objective is still beyond the present limits of empirical analysis.
On the policy side, the main message of the WDR 2006 can be summarized by the following quotes from the Overview of the report:
“Public action should focus on the distributions of assets, economic
opportunities, and political voice, rather than directly on inequality in
incomes.” (p. 3).
(The report) “presents evidence that the inequality of opportunity is inimi-
cal to sustainable development and poverty reduction (p. 3)
(It derives) policy implications that center on the broad concept of level-
ing the playing field – both politically and economically (p. 3)
“It makes the case for investing in people, expanding access to justice,
land, and infrastructure, and promoting fairness in markets (p. 4)
The first two quotes convey the idea that it is through the inequality of opportunity that the inequality of income can indirectly be corrected, and that it is mostly through opportunities that inequality has a negative impact on economic growth and poverty reduction. Hence, the recommendation follows in the last two quotes to level the playing field and to guarantee equal access to education of equal quality, credit, and infrastructure for all citizens. This equalizing of opportunities also had to address the economic and political institutions and the danger that they would be captured by a predatory elite. This is how politically must be interpreted in message (iii).
Beyond these strong general principles, policy experiences in various parts of the world to level the playing field were explored. Recommendations then fell into three categories (i) policies aimed at tilting the accumulation of human capital or infrastructure or the development of credit towards those groups in the population that had limited access to them (ii)
policies intended to correct failures in the functioning of some key markets,
such as land, labor, housing, or finance, which are responsible for unequal opportunities and slow growth and (iii) policies that can make institutions,
including justice and participation in public decision making, efficient and receptive to the interests of the least favored citizens.
The general message of the report meant a clear inflexion of standard macro-oriented development policies towards opportunity-poor people. It was well received and became rather consensual. However, at the same time, it did not really break with the modus operandi of bilateral of multilateral development agencies, despite its intent to deal with inequality, an issue that was most often ignored by these agencies. This was essentially because it did not recommend redistribution policies that would directly diminish income inequality. Instead, it insisted upon policies that would do so indirectly through a process of accumulation directed towards the poor and the correction of market failures that would also benefit aggregate growth. However, somehow, the report has not been explicit enough about the fact that equalizing opportunities also required some substantial income redistribu- tion.

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