Journal of Economic Perspectives: Vol. 27 No. 2 (Spring 2013)


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Latin America's Social Policy Challenge: Education, Social Insurance, Redistribution

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Levy, Santiago, and Norbert Schady. 2013. "Latin America's Social Policy Challenge: Education, Social Insurance, Redistribution." Journal of Economic Perspectives, 27(2): 193-218.

DOI: 10.1257/jep.27.2.193


Long regarded as a region beset by macroeconomic instability, high inflation, and excessive poverty and inequality, Latin America has undergone a major transformation over the last 20 years. The region has seen improved macroeconomic management and substantial and sustained reductions in poverty and inequality. In this paper, we argue that social policy, including human capital and education, social insurance, and redistribution, need special attention if achievements of the last two decades are to be sustained and amplified. Starting in the mid 1990s, many governments in the region introduced a variety of programs, including noncontributory pensions and health insurance, and cash transfers targeted to the poor. Social spending in Latin America increased sharply. These policies have been widely praised, and we believe they have resulted in substantial improvements in the lives of the poor in the region. However, a more nuanced view shows some worrisome trends. Moving forward, we believe it is necessary to pay much closer attention to the quality of services, particularly in education; to the incentives generated by the interplay of some programs, particularly in the labor market; to a more balanced intertemporal distribution of benefits, particularly between young and old; and to sustainable sources of finance, particularly to the link between contributions and benefits.

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Levy, Santiago (Inter-American Development Bank)
Schady, Norbert (Inter-American Development Bank)

JEL Classifications

H23: Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
I13: Health Insurance, Public and Private
I28: Education: Government Policy
I38: Welfare and Poverty: Government Programs; Provision and Effects of Welfare Programs
J24: Human Capital; Skills; Occupational Choice; Labor Productivity
O15: Economic Development: Human Resources; Human Development; Income Distribution; Migration


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