UN DESA
United Nations Department of Economic and Social Affairs
Distribution Analysis
Poverty and Social Assessments
Isabel Ortiz
Senior Interregional Advisor
United Nations DESA
UN Commission for Social Development
Side Event by Oxfam International and UN DESA
New York, 8 February 2008
Distribution of World Income:
Development for Whom?
Source: Sutcliffe, 2005. Department of Economic and Social Affairs. WP 2. United Nations
Bringing Distribution Analysis to
Development a Must: Inequality Escalating
Ratio of the Income of the Richest 20% to the Poorest 20%
Year
Ratio
1820
3:1
1870
7:1
120
1913
11:1
80
1960
30:1
1991
1997
2005
61:1
Ratio of the Income of the Richest 20% to
the Poorest 20%, 1820-2005
RATIO
100
60
40
20
0
74:1
1820 1870 1913 1960 1991 1997 2005
103:1
YEAR
Source: UNDP Human Development Reports 1999 and 2005, New York
The Core Problem: The Logic of
Development Interventions



Major development interventions selected by a non-social rationale
(e.g. GDP growth) – but these policies unable to generate high
employment growth
Complemented with residual, smaller social investments (human
development, safety nets) increased in recent years but often at the
cost of agriculture!
Military expenditures further constrain fiscal space for poverty reduct’n
Example: World Bank Lending, 1981-2007
1981-83
1987-89
1991-93
2001-02
2006-07
80
70
60
50
% 40
30
20
10
0
Human Dev
Agric
SECTOR
Water,
Environment
Finance, Energy,
Oil/Minerals,
Transport
Source: WB Annual Reports
No Trickle-Down Effect:
The Benefits of Economic Growth do
NOT Automatically Reach All
Source: Woodward and Simms, 2006. Department of Economic and Social Affairs.
WP 20. United Nations.
1995 World Summit in Copenhagen:
Development for All

Governments of the world agree that eradication of poverty and
promotion of social inclusion must be priorities of development
because of:
 Social Justice
 Economic Arguments




Inequality is economically dysfunctional
World problem of overproduction and global excess capacity in
the context of weak effective demand
Consumption concentrated in top income deciles
Raising the incomes of the poor increases domestic demand and,
in turn, encourages growth by expanding internal markets
 Political Arguments



Gross inequalities cause tension/conflicts, uncontrolled
migration
UNDESA core mission: Development for All
BUT – HOW?
From Targeted Interventions to
Mainstreaming Poverty and Social Issues
in Development
Key issue is not to leave social development in a “silo”,
but to mainstream social impacts in all interventions:
Tools/Instruments:
1. Social Safeguards, Corporate Social Responsibility
2. Distribution/Poverty and Social Assessments
3. Strategies/Action Plans for different social groups
Ultimately, what is needed are National Development
Strategies and International Agreements (e.g. trade)
with equitable distributional impacts, that benefit all
1990s onwards: Social Safeguards and
Corporate Social Responsibility

World Bank/AfDB Social Dimensions of Adjustment Initiative (1987) –
high human costs of structural adjustment

Safeguard approach in development institutions include:






Involuntary Resettlement
Gender
Indigenous Peoples
Impacts on the Poor
Social Protection and Labour Safeguards
Corporate Social Responsibility expands in the 1990s in the private
sector. The UN Global Compact promotes non-violation of Core
Labour Standards and UN Declaration of Human Rights by business.
Safeguards ensure compliance to minimum social standards as
exemplary practice (e.g. no child labour used in an investment)

As well as mitigating unintended negative social impacts of
development projects (e.g. compensation in case of resettlement
because of an infrastructure investment)
=> Necessary but insufficient approach - safeguards ensure that
poverty/exclusion is not increased, but they do not address the
structural reasons of poverty/exclusion

Late 1990s/2000s: Poverty and Social
Assessments in Development
 Poverty and Social Impact Assessments (also known
by acronym PSIA) are ex-ante analysis that look at the
distributional impacts (income and non-income) of
development interventions:
 Project level
 Sector reforms
 National Strategies
 International agreements (e.g. Trade)
 Provides alternative policy options to maximize
positive poverty and social impacts
 Needs to be an independent, non-partisan analysis
given vested interests at any level
 For policy-makers, it is a good tool to be accountable
to citizens through a public debate
Example: Impact of Policy Reforms
on the Poor
Table 2.4.2: Sample Table
Impact of Removal of Fertilizer Subsidy on the Poor
Summary analysis
of effects of
removing a
fertilizer subsidy
on the poor with
respect to:
(1) employment
(2) prices
(3) access to
goods/services
(4) transfers/taxes
Two policy options
CASE 1
Channel
Direct
Indirect
CASE 2
Macro
TYPE OF EFFECT
Non
Direct
poor
na
Na
Labor
market
(demand
for
unskilled
labor)
Prices of
goods
sold and
bought
by the
poor
Na
Same
fertilizer
use = no
effect
na
Higher
prices for
some,
lower for
poor
Lower
deficit =
less
inflation
na
Access
to public
goods
and
services
Increase
Reduced
rural
poverty
Transfer
s to the
poor
(minus
taxes)
Na
Same
use +
more
efficiency
= more
productio
n
Increase
d use by
smallhold
er
farmers =
increased
productio
n
na
na
Significant:
Indirect
Macro
Non
poor
na
Less
fertilizer
use =
less labor
Minor
Higher
prices for
poor
Less use
+ More
efficiency
= less
productio
n (minor
Less
productio
n = more
inflation
minor)
na
na
Less
Less use
= less
productio
n (minor)
Increase
d rural
poverty
na
na
Na
na
na
na
TOTAL NET EFFECT
Small:
Pro-poor: better access to fertilizer, lower inflation,
Anti-poor: fertilizer more expensive for them, higher
increased agricultural production
inflation, less agricultural production
ASSUMPTIONS ABOUT CRUCIAL VARIABLES
(i) Fertilizer is scarce at the subsidized price.
(i) Fertilizer is not scarce at the subsidized price.
(ii) The government funds saved are used to reduce the
(ii) The government funds saved are used to pay for
deficit.
more security costs.
(iii) Subsidy lowers the price to some consumers.
(iii) Subsidy lowers the price to some consumers.
(iv) No effect on transfers/taxes.
(iv) No effect on transfers/taxes:
BRIEF NARRATIVE
Slow Progress in Distribution/Poverty
and Social Assessments
Distribution/Poverty and Social Assessments are a
necessary tool to reduce poverty and exclusion BUT:
 Need to expand outreach:
 Done in selected interventions by the IFIs, piecemeal
approach (e.g. IMF only utilities)
 Also need to expand:
 Governments/National Development Strategies
 To other international organizations (e.g. WTO)
 Need to expand coverage to all social groups:


The poor always addressed, but not other excluded
social groups as agreed by UN international
conventions/agreements (women, older persons,
persons with disabilities, indigenous peoples, etc).
Despite women are half of world’s population,
economic and social inequalities and measures to
redress them are often misreported
Slow Progress in Distribution/Poverty
and Social Assessments (II)
• Areas: Analysis needs to cover all areas and discuss
policy options – e.g. very limited progress on:
 Macroeconomic policies (examples next slides)
 Trade - most trade agreements are done without
thinking on distributional impacts on population
 Policy options weak:
 EURODAD (Hayes, 2005): only 3 of 18 World Bank
PSIAs had a meaningful analysis of alternative
options
 Often minor policy changes or mitigative measures
instead of a complete alternative set of policies
 Policy space needed to discuss and implement real
alternatives that maximize impacts on people
Examples of Standard Macroeconomic
Policies and Alternative Options

Normal inflation target: below 5%
per annum

Normally fiscal policies: Minimal
direct taxation



Normally deficit reduction a priority
Country
Alternative: Expansive, employmentgenerating macroeconomic policies, tolerance
to limited inflation
Alternative: Progressive taxation for
development and redistributive purposes
Alternative: Public investment for
development; need to expand governments’
fiscal space

Fiscal Deficit
Targets over 3-year
IMF Program
Reduction
% GDP
What this could buy
for one year
Cameroon
-0.7 to 0.7
-1.4
Could have doubled health
expenditure
Ghana
-9.7 to –5.7
-4.0
Could have doubled primary
healthcare expenditure each
year of the 3-year program
Rwanda
-9.9 to –8.0
-1.9
Could double the health and
education budget in each of
three program years
Source: Oxfam International 2003 and Rick Rowden, Action Aid 2007
macroeconomic
stability
1
2
3
4
5
macroeconomic
instability
grey area
6
7
8
9
10 11 12
13 14 15 16 17 18 19 20 21 22 23 24 25
inflation rate
IMF Papers
Outside Papers
Estimated Inflation Thresholds
Fisher (1993)
15%-30 %
Bruno and Easterly (1998)
40%
Burdekin, et al (2000)
3% for developing and 8% for rich countries
Gylfason and Herbertsson (2001)
10%-20%
Pollin and Zhu (2005)
15%-18%
Bruno (1995)
20%
Barro (1996)
Finds that a 10% increase in the annual inflation rate
is associated on impact with a decline in GDP’s
annual growth rate of only 0.24%.
Sarel (1996)
8%
Khan and
Senhadji (2001)
Ghosh and
Phillips (1998)
11%-12% for developing and 1%-3 % for rich
countries
Finds that the inflation-growth relationship is convex, so
that the decline in growth associated with an increase of
10-20% inflation is (1998) much larger than that associated
with moving from 40% to 50% inflation.
Examples of Policy Options for Equity and Poverty Reduction
Area
Typical interventions with
EQUITABLE/PROGRESSIVE
outcomes
Typical interventions with
INEQUITABLE/REGRESSIVE
outcomes
Culture
Multicultural activities, popular events
that foster social cohesion
Subsidies to elitist events/
exclusive art
Education
Universal free education; programmes
to ensure access and retention of
students (particularly girls)
User fees in primary and
secondary education;
commercialization of education
Energy and
Mining
Rural electrification; life-line tariffs
(subsidized basic consumption for low
income households)
Untaxed oil/mineral extraction,
poorly negotiated PPPs power
plants
Finance
Regional rural banks, microfinance;
managing finance (current accounts,
capital flight…)
Reform/rescue of banking system
(transfers to large banks);
subsidies to large private
enterprises
Health
Universal free (or with minimal nominal
fees) primary and secondary health
services, nutrition programmes
User fees, commercialization of
health, tertiary highly specialized
clinics (e.g. cardiology centres)
Housing
Subsidized housing finance, upgrading
of substandard housing
Public loans for housing finance
for upper income groups
Industry
Supporting competitive, employmentgenerating domestic industries
Deregulation
Labour
Active and passive labour programmes
Labour flexibilization
Examples of Policy Options for Equity and Poverty Reduction
Area
Typical interventions with
EQUITABLE/PROGRESSIVE
outcomes
Typical interventions with
INEQUITABLE/REGRESSIVE
outcomes
Macroeconomics
Employment-sensitive monetary and
fiscal policies, countercyclical policies
Cyclical policies, indirect
taxation (VAT)
Public Expenditures
Progressive expenditures
Military spending
Rural Development
Secure access to land, water, markets,
livestock, credit for smallholders
Irrigation systems that benefit
landowners
Social Protection
Non-contributory pensions, cash
transfers, social services, etc.; almost all
SP aimed at redistribution
Private funded pension systems
Tourism
Small-scale local companies
Poorly taxed luxury hotel chains
Trade
Linking employment-generating local
companies with export markets
Most bilateral free trade
agreements
Transport and
Infrastructure
Rural roads, affordable public transport,
non-motorized transport for households
(bicycles, buffalos, etc)
Some large (and costly)
infrastructure investments
Urban Development
Slum upgrading, accessible universal
design
Large urban infrastructure
projects in wealthy areas
Water
Rural water supply and sanitation
Poorly negotiated privatizations
Source: Ortiz 2007. Social Policy Note. UNDESA Policy Notes for National Development Strategies, United Nations.
Slow Progress in Distribution/Poverty
and Social Assessments (III)
 Lack of independence:
 Need independent institutions to carry analysis
 Methodologies:
 Not standardized, plurality of approaches is correct but
problem when lack of rigor:
 Sophisticated quantitative models not necessarily
best – care with assumptions and parameters
 It is not only about income poverty: Poverty and
exclusion have many other dimensions including
discrimination, exploitation, lack of control of
resources, obstacles to access goods/services,
vulnerability to shocks, helplessness/fear to violence
and corruption, lack of voice in decision-making.
 Multidisciplinary approaches best, combining
quantitative and qualitative analysis
Slow Progress in Distribution/Poverty
and Social Assessments (IV)
 Short-long term impacts:
 Generalizations not acceptable (e.g. often the poor/excluded
groups benefit in the long term but upper income groups
benefit in the short term – transparency needed)
 Timing and Civil Society Participation:
 If distribution/poverty social assessments done too late,
cannot influence policy reforms
 Analysis needs to be released (+ translated!) to civil
society/parlamentarians as soon as possible, to allow for
public debate and to be contested if necessary
 See critical Joint NGO Briefing Note by Oxfam International,
Christian Aid, Bretton Woods Project, EURODAD and other NGOs,
2007.

Why only ex-ante?
 Distribution Analysis/Poverty and Social Assessments
should accompany the whole policy cycle to be accountable
Concluding
UN Commission for Social Development,
UN General Assembly, World Summits:
Governments of the world unanimous that
fighting poverty and exclusion is a priority

This priority will not be accomplished by having targeted
interventions to the poor, but about mainstreaming equity and
social inclusion in development
 Need to expand use of distribution analysis/poverty and social
assessments

To all national and international development interventions
 To all areas including trade, macroeconomic policies
 To all social groups

Need policy space for alternative equitable policy options
 Need public debate and be accountable to societies
 Distribution/Poverty Social Assessments are not free, their
costs need to be absorbed by governments and organizations –
Call to donors to fund Southern independent institutions

Thank you
United Nations Department of
Economic and Social Affairs
http://www.un.org/esa/
Email: ortizi@un.org