The Inequality Trap

AuthorFrancisco H.G. Ferreira and Michael Walton
PositionCurrently at Harvard's Kennedy School of Government codirected the World Development Report 2006: Equity and Development. The team included Abhijit Banerjee, Peter Lanjouw, Tamar Manuelyan-Atinc, Marta Menéndez, Berk Özler, Giovanna Prennushi, Vijayendra Rao, Jim Robinson, and Michael Woolcock

Why equity must be central to development policy

A girl born to a lower-caste family of nine in the slums of Dhaka has vastly different opportunities from a boy born to well-educated and affluent parents in the well-heeled neighborhoods. An AIDS orphan in rural Zimbabwe is almost certain to have fewer chances and choices in life than a compatriot born to healthy and well-educated parents in Harare. Those differences are even greater across borders: an average Swiss, American, or Japanese child born at the same instant as one in a poor, rural area of South Africa will have incomparably superior life chances.

Such staggering inequalities in opportunity are intrinsically objectionable, and almost every culture, religion, and philosophical tradition has developed arguments and beliefs that place great value on equity for its own sake. But that is not all. We would argue-as elaborated in the World Bank's World Development Report 2006: Equity and Development-that there is now considerable evidence that equity is also instrumental to the pursuit of long-term prosperity for society as a whole.

In developing this position, we do not focus on inequalities of outcomes (such as incomes), but on a conception of equity in terms of equality of opportunity. A person's life prospects should not be influenced by circumstances outside his or her control-such as country of birth, gender, race, and family origins. Outcomes, by contrast, may well differ, as a consequence of differences in effort, talent, and luck. This approach draws on central trends in philosophy of the past few decades, notably in the work of John Rawls, Ronald Dworkin, Amartya Sen, and John Roemer. But we also recognize that societies may decide to intervene to protect the livelihoods of its neediest members (living below some absolute threshold of need) even if the equal opportunity principle has been upheld. For that reason, we include avoidance of absolute deprivation as a basic principle of equity.

Immense inequities persist

The shaping of opportunities begins before individuals are born. Who one's parents are, what country they live in, and how rich they are, make a large difference to a person's opportunities in terms of life expectancy, education, access to services, and economic prospects. As Chart 1 shows, infant mortality rates vary markedly both within and across countries. In El Salvador, for instance, babies born to mothers with no schooling are four times more likely to die before their first birthday than babies whose mothers are better educated.

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Moreover, inequities persist during childhood. Consider the differences in test performance among Ecuadorian children ages three to five years, across population groups defined by parental education, region of residence, and wealth. As Chart 2 shows, those from the wealthiest quartile of households, or with mothers with more than 12 years of education, experience cognitive development in line with international norms (normalized to stay at 100 for all age groups). Children of poor or less-educated households develop skills much more slowly, restricting future opportunities. Such differences in potential are often magnified over life, through the education system and access to work and services.

[ SEE THE GRAPHIC AT THE ATTACHED ]

The massive inequities across countries are sustained by restrictions in international trade and migration that constitute by far the...

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