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The_Puzzle_of_Latin_American_Economic_Development_----_(Chapter_10_Poverty_in_Latin_America_)
The_Puzzle_of_Latin_American_Economic_Development_----_(Chapter_10_Poverty_in_Latin_America_)
The_Puzzle_of_Latin_American_Economic_Development_----_(Chapter_10_Poverty_in_Latin_America_)
Chilean society. Part of this puzzle might be resolved by looking at the variables
used to construct the HOI. By focusing on basic inputs—including school enrollment
and completion of sixth grade—it misses the constrained opportunities in the richer
countries. As countries progress, it is easier to meet this basic threshold and complete
primary school or provide great coverage in water or electricity. Yet a Chilean from
a poor neighborhood west of Central Santiago Centro, such as Quinta Normal and
Independencia, might find that a sixth-grade education does little to improve her
competitiveness with kids completing high school in the exclusive neighborhoods of
Las Condes and Vitacura. Secondary education increases the chances that a person
will remain out of poverty for the rest of their lives. Measures of inequality of oppor-
tunity in education—separable from overall opportunity— suggest that 35 percent of
all disparities in educational achievement in Latin America are from circumstances
beyond the individual’s control. This rate, even in the best country cases, is much
higher than European counterparts. The sad lesson is that in Latin America the
wealthier your family, the better your test score results. A concept in economic jus-
tice called the compensation principle suggests that inequalities due to circumstances
should be eliminated.22 But this is even more complicated than in wealthier countries
as the needs are greater and the budgets more constrained. Let’s now turn to consider
policies to redress inequality and alleviate poverty in the region.
significant wealth? Some such as Gabriel Palma suggest that elites in Latin America
have been uniquely capable of protecting their economic and social privilege.23
Political economists would point our attention to analyzing how politics shapes
social policy. The so-called three I’s of social protection—institutions, interests,
and ideas—give us clues as to the slow progress in reducing poverty and promoting
a fairer distribution.24 Political systems, while largely democratic in the region, may
not be responsive to constituent needs. Instead, a legacy of patron-client relations
impedes systemic change. The interests of key actors—the political elites, bureau-
crats, donors, or NGOs—may not align squarely with the needs of the poor. Ideas
held by elites about the causes and consequences of poverty and the obligations of
the state to provide a social safety net for the vulnerable may have prevented policy
innovation. Most poverty policies in the past have not systemically incorporated
gendered aspects of development, leading to distorted outcomes.
Franko, P. (2018). The puzzle of latin american economic development. Rowman & Littlefield Publishers.
Created from vand on 2023-03-21 03:59:27.
Poverty in Latin America 339
Even with this new political economy, we don’t always know why certain interven-
tions in the social sector work. We have, for example, an intuitive sense that educa-
tion and health are good investments. But education takes place in various social
and economic environments. A subset of development economics has advanced
work in identifying what works in what environments by applying techniques
most broadly used in the medical sciences. For example, one argument has been
that putting computers in classrooms will improve educational outcomes. But do
they? How? A randomized controlled trial (RCT) of the One Laptop per Child
program in Peru found little improvement in conventional math and language
Copyright © 2018. Rowman & Littlefield Publishers. All rights reserved.
Franko, P. (2018). The puzzle of latin american economic development. Rowman & Littlefield Publishers.
Created from vand on 2023-03-21 03:59:27.
340 CHAPTER ten
can help us understand why people behave in certain ways when basic conditions
can be controlled. It is less useful, however, in cases of infrastructure investment
or in assessing the distributional impacts of a policy.27 The large scale and one-off
nature make it difficult to set up control groups for study.
In addition to RCTs, other policy innovations are being experimented with to
address poverty. One new idea gaining traction is yes, another acronym—or really
two (or more)—RBF or COD. Results-based financing (RBF) and cash on delivery
(COD) share a common aspect in that they look at the outcomes rather than focus
on the programs. If the goal, for example, is to improve child and maternal health,
RBF will pay for a decrease in maternal and child morbidity, or an increase in
newborn weight. Care providers can be compensated at two stages—increasing the
number of pregnant and lactating moms enrolled and then later for results. Such
methods of pay for performance do of course have drawbacks. It is important to
verify results such that care deliverers do not have incentives for misreporting.
Counting quality outcomes can be problematic. Nonetheless, such schemes create
incentives for caregivers to work with communities to improve outcomes.28
Several principles can guide our poverty reduction policy menu. It is important
to design institutions that are fair and transparent to deliver quality goods and
services. Shining the light of transparency is the best antidote to corruption that
acts as a negative tax on public services. Institutional quality is critical. Providing
bad services can sometimes be worse that providing no services as all as they can
undermine trust in government. If people believe the government is inept they are
reluctant to pay taxes that might be squandered—and public services further dete-
riorate without a sound fiscal base.
Policymakers need to be wary of unintended effects. For example, tightening
regulations to draw more workers into the formal sector might actually drive firms
into informal status—an undesired goal as informality is associated with low pro-
ductivity. Providing too comfortable a safety net for the poor might depress sav-
ings and work effort.29 The goal of social protection is to provide help to the most
Copyright © 2018. Rowman & Littlefield Publishers. All rights reserved.
vulnerable while creating incentives to work and save. Programs ideally will be
geared to smooth consumption during crises, prevent poverty, and promote invest-
ment in human capital.30 Some programs should be designed to prevent social risks
through investment in human capital and other interventions intended to cope with
events that have already occurred. Attention should be paid to increasing risks from
climate change, food price spikes, and gendered social vulnerabilities.31
Franko, P. (2018). The puzzle of latin american economic development. Rowman & Littlefield Publishers.
Created from vand on 2023-03-21 03:59:27.
Poverty in Latin America 341
Franko, P. (2018). The puzzle of latin american economic development. Rowman & Littlefield Publishers.
Created from vand on 2023-03-21 03:59:27.
342 CHAPTER ten
Franko, P. (2018). The puzzle of latin american economic development. Rowman & Littlefield Publishers.
Created from vand on 2023-03-21 03:59:27.
Poverty in Latin America 343
borhood with the same lousy-quality schools, undrinkable tap water, and insuf-
ficient sanitation services, you continue to be relatively deprived. You are poorly
prepared to compete in the global economic market, and are probably prone to
intestinal disease that compromises your performance. Productivity sags.
The central policy challenge of poverty reduction is improving the capacity of
people to invest in their own skills and raise productivity. Youth born into neigh-
borhoods defined by chronic poverty may benefit from active labor market
policies (ALMPs) where governments intervene to help those unemployed find
work. These might include training programs, apprenticeships, vocational schools
and incentives to firms to hire riskier workers. By addressing market failures,
ALMPS can improve job prospects for skilled workers and young people.47 Think,
for a moment, about a job search where your record of work, probably a long one
since you were young, was not recorded. Imagine not having contacts through a
Franko, P. (2018). The puzzle of latin american economic development. Rowman & Littlefield Publishers.
Created from vand on 2023-03-21 03:59:27.