Présentation de Paolo Verme, Senior Poverty Specialist, World Bank, à la Conférence Internationale d'Experts sur la mesure et les approches politiques pour améliorer l'équité pour les nouvelles générations dans la région MENA à Rabat, Maroc du 22 au 23 mai 2012.

1. World Bank’s Approach To
Equity Measurement
Paolo Verme
World Bank and Department of Economics, University of Torino
“International Experts Conference on Measurement and Policy
Approaches to Enhance Equity for the New Generations in MENA”
Rabat 22-23 May, 2012

2. Two questions and two puzzles
Q1) Would you like to reduce income inequality?
Q2) Would you like all incomes to be equal?
P1) So, what level of inequality would you like?
P2) Is there an optimal level of inequality?

3. Inequality and Equity
• Do people think about the Gini index when
they talk about inequality?
• Or, do they think about equal
treatment, equal rights, equal
opportunities, fairness and justice?
• Inequality and inequity are two different
concepts but easily confused

4. Definitions
• Inequality (equality) measurement: The quantitative
measurement of distances between objects
(incomes, heights or stars). The Gini coefficient was
originally derived from astrophysics. The question
asked is what is the combined distance between
objects?
• Equity (inequity) measurement: The measurement of
inequality under principles of fairness and social
justice. The question asked is what is the difference
between outcomes of people who have equal rights
and make equal efforts?

5. The World Bank Approach
• The WB has for long insisted on equity, not inequality
• WDR (2006) Equity and Development, defines equity in
terms of fairness
• Inequality is not ignored. Poverty studies and Branko
Milanovic work on world inequality, but few country
studies focus on inequality per se
• Inequality reduction is not a policy goal
• Equity improvement is the policy goal

6. Why Equity Matters for Children (WDR, 2006)

7. Why Equity Matters for Children (WDR, 2006)

8. Equity Measurement – Recent Advances
• Inequality of opportunities
– Roemer (1998)
– WDR on Equity and Development, 2006
– Recent World Bank work
• Relative deprivation
– Runciman (1966), Yitzhaki (1979)
– New indexes of relative deprivation
– Recent World Bank work
• Perceptions of welfare
– Happiness literature
– Household Budget Surveys Vs. World Values Surveys
– Recent World Bank work

9. Some recent examples of WB work
Worldwide
• Inequality of opportunity, various countries
• Human Opportunity Index (HOI), LAC and other countries
• Equitable distribution subsidies, various countries
• Equitable distribution of social transfers, various
countries
• Health equity financing, various countries
• Labor Opportunities in ECA
MENA
• Gender equity in West Bank and Gaza
• Labor Deprivation in Morocco
• Perceptions of inequality in Egypt
• Inequality of opportunities for Children in Egypt

10. Inequality of opportunity
(Ferreira, F.)
Literature:
• Rawls (1971) “A theory of justice”
• Sen (1980) “Equality of What?”
• Roemer (1998) “Equality of Opportunity”
Contents:
• Circumstances Vs. Efforts
• Ex-ante Vs. ex-post approach
– Ex-ante: inequality in the value of opportunity sets across types.
Values the opportunity set of each individual but does not
observe efforts
– Ex-post: inequality among people who exert the same degree of
efforts. Does not value the opportunity set of each individual
but observes efforts levels

11. Inequality of Opportunity
Some Evidence (Ferreira, F.)

12. Inequality of Opportunity
Some conclusions (Ferreira F.)
• Inequality of opportunity is possibly the most
salient inequality concept in terms of its
normative content: “bad inequality”
• It can be measured with respect to income or
educational achievement, by ex-ante or ex-
post approaches
• A review of the recent applied literature
yields lower bound estimates from 2%
(Denmark) to 50% (Guatemala)

13. Human Opportunity Index - LAC
• The Human Opportunity Index (HOI) measures the percentage of available
opportunities needed to ensure children’s universal access to basic services and
their equal allocation.
• The index ranges from 0 (absolute deprivation) to 100 (universality).
• The HOI for education includes two indicators: completion of sixth grade on time
and school attendance for ages 10-14.
• The HOI for housing includes three indicators: access to water, sanitation, and
electricity.
• The HOI for Latin American children has increased in the last decade for all basic
opportunities
• Within each dimension (i.e. education and housing), the indicators have the same
weight. In generating the composite HOI, each dimension has the same weight.
• Parents education seems to be the most important factor in explaining unequal
distribution of children’s opportunities

14. HOI - LAC
HOI Education HOI Housing HOI
conditions
Argentina 89 88 88
Bolivia 83 41 62
Brazil 67 77 72
Chile 90 93 91
Colombia 78 69 74
CostaRica 79 94 86
DominicaRepublic 77 65 71
Ecuador 80 69 74
El Salvador 65 46 55
Guatemala 51 50 50
Honduras 62 44 53
Jamaica 90 55 73
Mexico 88 75 82
Nicaragua 59 34 46
Panama 81 57 69
Paraguay 74 59 67
Peru 83 49 66
Uruguay 85 85 85
Venezuela 84 89 86
Average 76 64 70

15. Inequality in labor markets (Abras et al.)
Contribution of circumstances
(Jobs with 20 hrs+ and tenure)
20
18
16
Dissimilarity Index (%)
14
12
10
8
6
4
2
0
Kyrgyzstan
Kazakhstan
Latvia
Russia
Lithuania
Slovenia
Croatia
Circumstances Age Education

16. Inequality in labor markets (Abras et al.)
Relative Contribution to Inequality of circumstances
(Jobs with 20 hrs+ and tenure)
Russia
Lithuania
Latvia
Kyrgyzstan
Kazakhstan
Slovenia
Croatia
0% 20% 40% 60% 80% 100%
Gender Father's education Parents at communist party Self-reported minority

17. Labor deprivation and gender in Morocco
(Serajuddin and Verme)
RLD (All) RLD (Youth)
When the reference group is
universal
Society 0.279 0.269
Decomposed by gender
Female 0.202 0.179
Male 0.077 0.090
When the reference group is
gender specific
Society 0.240 0.221
Male 0.292 0.291
Female 0.137 0.118

18. % of total subsidy accruing
0%
10%
20%
30%
40%
50%
60%
Denmark
UK
Kerala
Indonesia
Vietnam
Ghana
Peru
Guinea
Bihar
Richest 20%
Poorest 20%
Health subsidies (Wagstaff, A.)

19. Equity in Health Finance (Wagstaff, A.)
Progressivity – total payments
0.25
0.20
0.15
0.10
0.05
0.00
-0.05
-0.10

20. Perceptions of inequality (Verme, P.)
Pro-inequality score in Egypt
10
9.5
9
Mean Pro-inequality
8.5
8 2000
7.5 2008
7
6.5
6
5.5
5
1 2 3 4 5 6 7 8 9 10

21. -2.5
-1.5
-0.5
0.5
1.5
-3
-1
-2
1
0
morocco
iran
egypt
moldova
china
viet nam
jordan
peru
south korea
indonesia
canada
japan
argentina
united states
spain
india
turkey
Perceptions of inequality (Verme, P.)
chile
mexico
Change in pro-inequality score (2000-2008)

22. Inequality of Opportunity for Children
in Egypt (Velez et al.)
Opportunity 2000 Circa 2009 Annual rate Decomposition *
of change Access Equality of
Opportunity
Complete primary education on time 51 56 0.6 88.0 12.0
Complete secondary education on time 55 60 0.6 81.0 19.0
Complete post-secondary education on time 7 11 0.5 82.0 18.0
School attendance, 9-15 0 89 0.0 0.0 0.0
Water 77 88 1.3 67.0 33.0
Sanitation 26 30 0.5 64.0 36.0
Lighting energy source 98 99 0.1 0.0 0.0
Cooking energy source 73 98 2.8 64.0 36.0
Non-overcrowding, 0-5 48 59 1.2 62.0 38.0
Telephone 14 71 6.3 78.0 22.0
Assisted birth delivery 64 84 2.5 74.0 26.0
Post-natal care, 0-5 19 28 1.1 91.0 9.0
Prenatal care, 0-4 58 78 2.6 76.0 24.0
Immunization vaccines, 0-4 87 85 -0.2 12.0 88.0
Non-wasting, 0-4 88 75 -1.6 79.0 21.0
Non-stunting, 2-17 69 69 0.0 0.0 0.0
Non-underweight, 0-17 80 85 0.6 60.0 40.0
Aggregate HOIa16 57 67 1.2 0.0 0.0

23. Equity Measurement for Children
Some Challenges
• The Inequality of opportunity work is generally based on
HBSs
• HBSs cover 95-98% of the population but typically exclude
the extremely rich and the extremely poor
• HBSs very rarely measure intra-household distribution of
resources
• HBSs very rarely question children, only adults
• Head of households may not report accurately
information on children work, education, disabilities and
mental status and do not usually report domestic violence
• HBSs do not cover street/homeless/parentless children
• Standard HBSs are not sufficient instruments to assess
children opportunities

24. Secular and Recent Facts about
Inequality
• Poverty decline Vs. inequality increases -
secular trends
• The poor are joining the middle-class but the
rich have left everyone else behind
• Then, the 2007-2008 global financial
crisis, evidence on top 1% of incomes, banks’
premiums, wall street protests, Arab
spring, bankrupt governments,…

25. World Poverty 1981-2008
Headcount index of poverty (% below poverty line)
70
$2 per day
65
60
$2 per day (less China)
55
50
45 $1.25 per day
40
35
$ 1.25 per day (less China)
30
25
20
1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

26. World Inequality (Milanovic, B.)

27. Some final questions
• Is income inequality back from the cold?
• Is there an optimal level of income
inequality?
• Is there an equitable level of income
inequality?
• Should these questions be asked?