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I. The case for focusing on inequality . . . . . . . . . . . . . . . . . . . . . . . 13 Linkages between poverty eradication and inequality . . . . . . . . . . . . . 14 Inequality and the economic dimension of poverty . . . . . . . . . . . . . . . .14 Inequality and the socio-political dimensions of poverty . . . . . . . . . . . . . 16 Structural reform, the public sector and inequality. . . . . . . . .. . . . . . . 19 Universal access to education, health care and social protection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 21 Patterns of intervention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 II. A spotlight on inequality: the informal economy. . . . . . . . . . . . 29 A brief overview of the informal economy . . . . . . . . . . . . . . . . . . 30 The attraction of the informal economy . . . . . . . . . . . . . . . . . . 34 Reasons for the growth of the informal economy . . . . . . . . . . . . . 36 Linkages between the formal and informal economies. . . . . . . . 38 Conclusion . . . . . . . . . . . . . . . . . . 41 III. Trends and patterns of inequality . . . . . . . . . . . . . . . . . . . . . . . 43 Economic aspects of inequality . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Income inequality between countries. . . . . . . . . . . . . . . . . . . . 44 Income inequality within countries . . . . . . . . . . . . . . . . . . . . . . 47 Poverty . . . . . . . . . . . . 50 Unemployment . . . . . . . . . . . . . . . . . . . . . . . . . 55 Non-economic aspects of inequality . . . . . . . . . . . . . . . 58 Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Life expectancy. . . . . . . . . . . . . . . . . . .. . . . . . . . . . 59 Maternal and child health. . . . . . . . . . . . . . . . . . . . . 62 HIV/AIDS and other deseases . . . . . . . . . . . . . .. . . . . . . . 68 Hunger and malnutrition . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Education. . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 72 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 78 IV. Inequalities and social integration . . . . . . . . . . . . . . . . . . . . . 81 Intergenerational dimensions of inequality . . . . . . . . . . . . . . . . . . 82 Consumption, inequality and social integration . . . . . . . . . . . . . . 84 Violence and inequality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Violent crime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Armed conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 91 Youth demographics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 Rape and child soldiers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 Domestic violence and slavery. . . . . . . . . . . . . . . . . . . . . . . . . 97 Fostering democracy and social integration . . . . . . . . . . . . . . . 99 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 V. The changing context of development and inequality . . . . . . 105 Globalization: asymmetries and the loss of policy space. . . . . . . 105 The impact of liberalization and stabilization policies on inequality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 Financial liberalization . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 110 Trade liberalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 Financing the social agenda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 Official development assistance . . . . . . . . . . . . . . . . . . . .. . . 114 Innovative sources of financing. . . . . . . . . . . . . . . . . . . . . . 116 Migrant remittances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 Domestic financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 The peace dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 The role of the State and civil society . . . . . . . . . . . . . . . . . 125 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 128 VI. The way forward: policies to reduce inequality. . . . . . . . . . . . 131 Redressing global asymmetries . . . . . . . . . . . . . . . . . . . . . . . . . 132 Intensifying integrated strategies and policies for poverty eradication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 Guaranteeing employment opportunities for all . . . . . . . . . . . . . . 134 Fostering social integration and cohesion . . . . . . . . . . . . . . . . . . . . 136 Annex The ten commitments of the World Summit for Social Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . 143

Figures I.1. Policy framework: the three main pillars of social development centred on equity and equality . . . . . . . . . . . . . . . . . 13 I.2. Relationship between life expectancy at birth and the level of public and private health spending, 2002 . . . . . . . . . . . . . . . . . . 25 III.1. Evolution of income inequality among countries . . . . . . . . . . . . . 45

III.2. Per capita gross domestic product in the poorest and richest countries, 1960-1962 and 2000-2002. . . . . . . . . . . . . . . . 45 III.3. Inequalities in life expectancy between major world regions: deviations of regional life expectancy at birth from that of Australia/New Zealand, (1990-1995 and 2000-2005) . . . . . . . . . . 60 III.4. Distribution of all countries according to how far their life expectancy falls below that of Japan, 1990 and 2000 . . . . . . . . . 61 V.1. Aid from all Development Assistance Committee (DAC) donors as a percentage of gross domestic product: the long-term trend to 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . 114 V.2. Aid from Development Assistance Committee (DAC) donors as a proportion of gross domestic product . . . . . . . . . . . . . . . . . . . 115 V.3. Social sector spending among country groupings classified by income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 V.4. Defence and social sector spending in countries with the highest defence expenditures . . . . . . . . . . . . . . . . . . . . . . . . 122 V.5. Defence and social spending in countries with the highest social sector expenditures . . . . . . . . . . . . . . . . . . . .. . . . 123 Tables II.1. Size and growth of the informal sector in selected countries, by sex . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 31 III.1. Regional per capita income as a share of high-income OECD countries’ average per capita income . . . . . . .. . . . . . . . . 46 III.2. Distribution of countries according to trends in Gini coefficients for income distribution between the 1950s and the 1990s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 III.3. Poverty rates for the world, major regions, and China and India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 III.4. Unemployment rates, labour force growth rates and GDP growth rates for the world and major regions . . . . . . . . . . . . . . . . 56 III.5. Levels of under-five mortality for selected countries and between-country inequality indices . . . . . . . . . . . . . . . . . . . . . . . . . . 63 III.6. Under-five mortality for countries with the highest and lowest rates, 1995, 2000 and 2002. . . . . . . . . . . . . . . . . . . . . . . . . . 64 III.7. Immunization coverage among children aged 12-23 months, by country and selected background characteristics . . . . . . . . . . 66 III.8. Differentials within and between selected countries in access to skilled medical care at delivery for children born three years before the survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 III.9. Adults and children affected by HIV/AIDS: the world and major regions, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 68 III.10. Women living with HIV: the world and major regions, 2004 . . . 69 III.11. Percentages of total, urban and rural household populations with no education, by sex. . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 74 III.12. Inequalities in primary school enrolment: the world and major regions, 1998 and 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 III.13. Inequalities in secondary school enrolment: the world and major regions, 1998 and 2001. . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

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