Economic Mobility in Developing Countries Has Stalled for the Last 30 Years: World Bank Group Report

Development – IGM [Intergenerational Mobility]

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Economic Mobility in Developing Countries Has Stalled for the Last 30 Years: WBG Report
Press Release
WASHINGTON, May 9, 2018 – Generations of poor people in developing countries are trapped
in a cycle of poverty determined by their circumstance at birth and unable to ascend the economic ladder due to inequality of opportunity, says the World Bank Group’s ‘Fair Progress? Economic Mobility across Generations Around the World’ report, released today.

Mobility has stalled for the last 30 years, says the report, which tracks economic mobility between parents and their children through the prism of education, a critical asset that influences an individual’s lifetime earnings. It looks at people born between 1940 and 1980, and finds that 46 out of 50 countries with the lowest rates of mobility from the bottom to the top are in the developing world.

Gender gaps, however, are closing with girls in high-income countries now out-performing boys in tertiary education and catching up in the developing world. In the not too distant future, the share of girls with more education than their parents will exceed the equivalent share for boys globally.

The ability to move up the economic ladder, irrespective of the socioeconomic background of one’s parents, contributes to reducing poverty and inequality, and may help boost economic growth by giving everyone a chance to use their talents, the report notes. People living in more mobile societies are more optimistic about their children’s future, which is likely to lead to a more aspirational and cohesive society…

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Fair Progress? Economic Mobility across Generations Around the World
World Bank Group 2018 :: 311 pages
Ambar Narayan, Roy Van der Weide, Alexandru Cojocaru, Christoph Lakner, Silvia Redaelli, Daniel Gerszon Mahler, Rakesh Gupta N. Ramasubbaiah, and Stefan Thewissen
ISBN (electronic): 978-1-4648-1279-8
DOI: 10.1596/978-1-4648-1210-1
Overview [Excerpt]
… This study measures the extent of IGM in economies across the world, how it has evolved over time and across generations, and the factors that might be associated with higher mobility, to draw implications for policy. By reporting findings on a global scale, it fills an important gap in the empirical evidence on IGM. For its global analysis, this study focuses primarily on mobility in education, which is important in its own right and is an essential element of economic mobility.
A newly created database—the Global Database of Intergenerational Mobility (GDIM)— covering more than 95 percent of the global population—forms the basis for most of the primary data analysis. To complement the global story of educational mobility, IGM in income is measured or compiled from existing studies for a smaller set of economies to shed some light on the patterns and drivers of income mobility and its relationship with educational mobility….

Two concepts of intergenerational mobility
Socioeconomic mobility has been interpreted in several ways in the economic and sociological
literature, including as mobility within and between generations and as mobility in incomes, educational attainment, and occupation.
This report focuses on mobility between generations. To illustrate the two concepts of IGM used here, it is helpful to imagine two generations of adults standing on different rungs of the same economic ladder, where the rungs indicate one’s economic success relative to everyone else based on, for example, lifetime income. Absolute upward IGM measures the extent to which the current generation has managed to climb up the ladder relative to the previous generation or the extent to which the rungs occupied by the current generation are higher than the rungs occupied by the previous generation, that is, the parents of the current generation.
Relative IGM is the extent to which every individual’s position on the economic ladder is independent of the position of the individual’s parents. If an individual reaches a rung of the ladder among peers that is different from what the individual’s parents occupied among parents of the peers, then there has been relative mobility.

Conclusion: A Few Principles for IGM-Enhancing Policies
For sustainable and inclusive growth, public policy must support a social contract that addresses people’s aspirations. Such a contract, in most countries, is likely to be one where all parents can expect their children to have better lives than themselves (absolute upward IGM) and where an individual’s position on the income scale is less tied to the status of his or her parents (relative IGM). Policies that achieve success on both these fronts can create a positive feedback loop, because citizens’ perceptions of higher mobility can, in turn, lead to a social consensus that improves the environment for policies of the future…

To break the cycle of high inequality and low mobility, a government would need to prioritize policies that raise opportunities for the least advantaged groups at various stages of life, as appropriate for a country’s own context. In most developing economies, where relative mobility in education tends to be low, investments and policies aimed at the initial stages of an individual’s life cycle are necessary for promoting IGM in education as well as income…