The Inefficiency of Inequality

Thirty-Seventh Session of ECLAC (Havana, 7-11 May 2018)

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Inequality is inefficient because it hinders learning, productivity, innovation and growth. Equality is, then, not only an ethical principle inherent to development, but also a key tool for achieving it. This document examines the mechanisms by which inequality erodes dynamic efficiency in the Latin American and Caribbean economies. It analyses and measures the productivity and income effects of unequal access to health and education, as well as the consequences of inequality of opportunities arising from gender-, race- or ethnicity-based discrimination. It also examines how these inequalities play out at the level of territory, infrastructure and urban dynamics, where their costs not only weigh on productivity, but also worsen energy inefficiencies and environmental degradation, thereby compromising the development possibilities of present and future generations. ECLAC proposes strategic guidelines for increasing the dynamic efficiency of the Latin American and Caribbean economies on the basis of equality.

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Strategic orientations

Inequality is inefficient. The culture of privilege and the prevailing pattern of development produce disparities that increase the differences between the centres and the peripheries, rather than reduce them, while generating unsustainable income polarization. Macroeconomic uncertainty, the geopolitical emergence of China, the technological revolution and the worsening environmental crisis are additional factors that make the international scenario more complex. Responding to these changes requires cooperative strategic decisions at the global, regional and national levels, under a multilateral approach engaging all stakeholders. In this framework, the Economic Commission for Latin America and the Caribbean (ECLAC) reaffirms its belief that the countries of the region need to launch a new development paradigm based on an environmental big push.

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