Rethinking Inequality in Arab States
Khalid Abu-Ismail, Paul Makdissi and Oussama Safa
Special Session Rethinking Inequality in the Arab States, Beirut, April 2019
1. Declining Outcome Inequalities in most basic Health and Education Indicators
COM
EGYIRQ
JOR
LBY
MRT
MAR
PSE
SDN
YEM
COM
EGYIRQ
JOR
MRTSDN
COM
EGY IRQ
JOR
MRTMAR
PSESDN
COM
EGY
IRQJOR
MRT
PSE
SDN
COMEGY
IRQ
JORLBY
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PSE
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EGY
JOR
LBYPSE
EGY
JOR
LBY
PSE
YEM
COM
EGY
JOR
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YEM
-5
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5
7
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-10 -8 -6 -4 -2 0 2 4
AA
RC
in in
dic
ato
r (%
)
AARC in ratio of wealth quintiles (%)
Stunting Average years of education (Age 25+) Completion 6 years (Age 25+)
Completion 12 years (Age 25+) Skilled attendance at birth Infant Mortality Rate
Improved sanitation Safe drinking water
Higher Achievement
Less Inequality
Source: ESCWA’s calculations based on household surveysNote that for all indicators, we set -10 and 10% as lower and upper bounds for the average annual rate of changes (AARC) in the ratio of richest to poorest quintiles . Generally, AARC values for all countries fall within this range, except for the following cases. Palestine and Sudan for safe drinking water. Mauritania and Morocco for improved sanitation.
▪ All indicators are measured as achievements ; so , the wealth ratio measures richest to poorest quintile.▪ Overall, Arab countries have had human capital gains while also reducing inequality.
Figure 1 : Average annual rate of change (AARC) for selected indicators and their respective wealth ratio
DZA
BHR
COMEGY
IRQ*
JORKWT
LBN*
LBY
MRT
MAR
OMN*
PSE*QAT
SAUSDN
SYRTUNUAE
YEM
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
-25 -20 -15 -10 -5 0 5 10 15 20 25
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RC
lif
e ex
pec
tan
cy in
dex
(%)
AARC inequality in life expectancy index(%)
Source: Based on Human Development Indices and Indicators: 2018 Statistical Update, UNDP.Note that for life expectancy, in Lebanon, Iraq, Oman and Palestine, the baseline year is 2011 due to data unavailability in 2010. For education, in Lebanon, Iraq and Palestine, the baseline years are 2011, 2012 and 2013 respectively due to data unavailability in 2010. For Morocco and Syria, the end-line year is 2015 and 2016 due to data unavailability in 2017.
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SYR*
TUNPSE*
…
LBN*
IRQ*
-5
-4
-3
-2
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1
2
3
4
-25 -20 -15 -10 -5 0 5 10 15 20 25
AA
RC
ed
uca
tio
n in
dex
(%
)
AARC inequality in education index(%)
2. Supporting Evidence from Human Development Report
Figure 2 : Average annual rate of change (AARC) in life expectancy and education indices and their Atkinson measures (2010-2017)
Life expectancy Education
▪ Consistent with our findings, the majority of countries mark improvements in human capital and reduction in inequality .
▪ Inequality reduction in health dimension is much higher than that in education.
COM
EGY
JORLBN*
MRT
MAR*
SYR
TUN
YEM
PSE*
IRQ*
-6
-5
-4
-3
-2
-1
0
1
2
3
4
-25 -20 -15 -10 -5 0 5 10 15
AA
RC
inco
me
ind
ex (
%)
AARC inequality in income index(%)
3. Human capital gains set against stagnating income and rising income inequalities
Source: Based on Human Development Indices and Indicators: 2018 Statistical Update, UNDP.Note that for Lebanon, Iraq and Palestine, the baseline years are 2011 and 2013 respectively due to data unavailability in 2010. For Morocco and Syria, the end-line year is 2015 and 2016 due to data unavailability in 2017.
▪ Sluggish progress in GNI per capita levels , especially relative to the education and health dimensions. ▪ Several countries have increasing income inequality.
Figure 4 : Average annual rate of change (AARC) in income index (i.e. normalized GNI per capita, $ 2011 PPP) and its Atkinson measures
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GN
I per
cap
ita
($ 2
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1 P
PP
)
Arab Very High Arab High Arab Medium Arab Low Arab
Source: Author’s calculations based on HDI data
Figure 3 : GNI per capita ($2011 PPP) over 1990-2017
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2002 2010 2015 2002 2010 2015 2002 2010 2015 2002 2010 2015 2002 2010 2015 2002 2010 2015 2002 2010 2015 2002 2010 2015 2002 2010 2015 2002 2010 2015 2002 2010 2015 2002 2010 2015
Algeria Lebanon Tunisia Jordan Iraq Egypt Morocco Palestine Sudan Mauritania Syria Yemen
$/y
ear
Mean HH income($PPP/year) GNI per capita ( $2011 PPP)
4. Increases in GNI per capita not transmitted to households in middle-income countries and widening gaps
Figure 4 : GNI per capita levels versus household income (annual)
Source: Povcal for household income levels and Human Development Data for GNI per capita levels
▪ High and middle human development countries have wide gaps between GNI per capita and actual household incomes that persisted over time .
▪ The narrower gap in low development and conflict countries reflect the overall poor socioeconomic conditions.
5. Economic Policy Drivers of Inequality: Rents and Liberalization
1. Lack of structural transformation: over the period 1990-2012, growth was concentrated in low value added service sectors (ESCWA,2014).
• High levels of informality: According to ILO (2018), 68.6% of employment is informal in the Arab states.
• Inequality in factor shares: Arab firms tend to have higher capital shares relative to wages (ESCWA-ILO, forthcoming 2019).
• High levels of unemployment and discouraged workers (partially reflected in decreasing labor force participation rates over time), especially among the youth and females.
• Declining labor productivity growth.
2. Lack of progressive fiscal policies
• Although social expenditure is relatively high in the Arab region, most of the subsidies, especially fuel subsidies, were actually regressive.
• Arab governments rely mostly on regressive indirect taxation (e.g. VAT) for fiscal revenues.
3. Fiscal capacities for development expenditures are increasingly constrained, especially with high debt obligations and low oil prices.
6. Region also has very poor governance (closely associated with conflict)
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-100 -80 -60 -40 -20 0 20 40 60 80
Ch
ange in
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litical stability in
dex(%
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Change in governance index: G3 (%)
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JOR
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0 20000 40000 60000 80000 100000 120000 140000
G3
ined
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GNI per capita ($ 2011 PPP)
Figure 5 : GNI per capita ($2011 PPP) and Governance index(G3) in 2017 Figure 6 : Percentage change in G3 and political stability indices, 2000-2017
Source: World Governance Indicators (WGI) and Human Development Indices and Indicators: 2018 Statistical Update, UNDP.
Source: Based on World Governance Indicators (WGI).
▪ Oil- rich countries have high GNI per capita and relatively low governance levels in line with the rentier social contract.
Key Message
Human Capital Development
(i.e. Health and Education)
Decent and Productive
Employment
Inclusive Economic Growth
Poverty and Inequality Reduction
Peace and Stability
Enhanced Governance
and Institutions
This cycle is not functioning properly in the Arab region
=> Impaired links weaken its functionality
Increase tax base and fiscal capacity for social expenditures.
Acquiring skills demanded in the labor market, especially by private sector.
▪ The Economic Research Forum (ERF) is a regional network dedicated to promoting high quality economic research to contribute to sustainable development in the Arab countries, Iran and Turkey.
▪ Currently, there are 311 affiliates: 179 Research Fellows, 66 Research Associates, 42 Senior Associates and 24 Policy Affiliates.
▪ In 2018, ERF and ESCWA agreed to prepare a joint report on inequality in the Arab region.
▪ ERF’s researchers contributed in providing the analysis of the inequality of opportunities component in educational attainment, health, with a special focus on the gender contribution to these inequalities.
ERF-ESCWA collaboration
Inequality of opportunity in education: An example
Source: Author’s calculation based on household surveys
0%10%20%30%40%50%60%70%80%90%
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er A
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2006 2014
Palestine
Gender Father's Education Mother's Education Area of Residence Wealth
Inequality of opportunity in education: Gender aspect
6.03
13.55
0.63
5.20
11.65 10.76
38.28
9.18 8.167.72
27.75 28.51
17.78
50.19
10.5
44
1.870.43
ALGERIA 2012 COMOROS 2012
EGYPT 2014 IRAQ 2011 JORDAN 2012 LIBYA 2014 PALESTINE 2014
SUDAN 2014 TUNISIA 2011
Primary completion rate Secondary completion rateSource: Author’s calculation based on household surveys
Inequality of opportunity in health outcomes and services: An example
Source: Author’s calculation based on household surveys
Inequality of opportunity in stunting: Gender aspect
0.1
9.65
0.56 0.3
14.61
4.3 3.14 3.40.66 0.03
17.99
6.16
38.85
4.04
16.8
2.14 2.89
16.66
3.796.36
4.29
ALG
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IA
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IRA
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JOR
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ITA
NIA
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RO
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ST
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NIS
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YE
ME
N
Baseline Endline
Source: Author’s calculation based on household surveys
Gender Inequality: Where should we look?
0 0.2 0.4 0.6 0.8 1 1.2
Tunisia
United Arab Emirates
Kuwait
Qatar
Algeria
Bahrain
Egypt
Mauritania
Morocco
Jordan
Oman
Lebanon
Saudi Arabia
Syria
Iraq
Yemen
World average
Arab countries average
Political Empowerment Health and Survival Educational attainment Economic participation and opportunity
Source: Global Gender Gap Report
Thank you !
Special Session Rethinking Inequality in the Arab States, Beirut, April 2019
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