Next World Development Report: Equity and development

21 September 2004

An outline of the Bank’s flagship annual report, the World Development Report (WDR), which will focus on inequality was released in August. The choice of this year’s topic raises old questions about the role of the WDR. Critics of the Bank’s self-proclaimed role as ‘knowledge bank’ question the additional value of this undertaking with substantial public resources when the UN’s World Institute on Development Economics Research (WIDER) has just released three volumes on inequality and UNDP will publish its next Human Development Report on the same topic.

The report will include three sections: measuring inequality, impacts of inequality and institutions/policies for reducing inequality. The first part will look at inequalities between individuals and households, between genders, and between groups (castes/classes/ethnic or social grouping) – within countries, between countries and at the global level. This will look at both income inequality and non-income dimensions of welfare such as education and health. The main conclusion is anticipated to be that “the world is a vastly unequal place”.

The second part will examine the impacts of inequality on well-being, investment and conflict. One of the key assumptions will be that there is no general relationship between economic inequality and growth. A framework will be used which illustrates “circular causation between economic, social and political processes” with institutions playing a mediating role. The impact of inequality on conflict will examine struggles for public resources, crime, as well as violent conflict and civil war. The anticipated lessons are that inequality is bad because people have a “preference for social equality” and “high levels of inequality can make overall development and poverty reduction harder to achieve.”

raises old questions about the role of the WDR

The most contentious debates will likely centre on the institutions and policies to reduce inequality. The report will argue that “the common distinction between growth-oriented policies and redistributive policies is misguided”, saying that such a distinction fails to recognise that both types of policies have equity and efficiency effects. Rather than requiring each policy to balance these considerations, the authors argue that “it is the overall mix that matters.” The report will look at inequality and structural adjustment, and examine the impact of various international policies in trade, property rights, migration, and capital flows on inequality.

The WDR team will be led by Francisco Ferreira of the development economics research group of the Bank. Advisors will include the new chief economist Francois Bourguignon who holds a special interest in this area, and a host of US-based academics. The consultation process is being led by Christopher Neal of the external affairs department of the Latin American region.

The Bretton Woods Project will be maintaining a watching brief on the development of the WDR 2006 with the assistance of a number of specialists in this discipline.