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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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Foreword

The Latin American and Caribbean region is facing a scenario that offers opportunities, yet is also shadowed by global uncertainties at a time when the region’s economies are in need of profound and urgent changes. Moving towards greater equality is not only an ethical obligation in a region with multiple social gaps, but also a necessary condition for accelerating productivity growth, internalizing and disseminating the digital revolution, making the transition to environmental sustainability and establishing an institutional framework for action in a world in which major imbalances exist alongside enormous potential.

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