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SHIFTING WEALTH,
CHINA AND THE LATIN AMERICAN CHALLENGE
An OECD Perspective
Rolando Avendano
OECD Development Centre
Universidad Autónoma de Mexico
Mexico City – May 29 2012
2
Outline
1 Shifting Wealth: continuing despite hurdles
2 China and Latin America: recent dynamics
3 Overcoming the middle income trap
4 After the diagnostic: public policies to overcome the challenge
3
4
New Geography of Growth: The Four-speed World in the 1990s
Source: OECD Development Centre, Perspectives on Global Development 2012
The disappointing reality
5
A New Geography of Growth: The Four-speed World in the 2000s
Goodbye divergence, hello convergence?
Source: OECD Development Centre, Perspectives on Global Development 2012
6
Global middle class consumption: catching up in the developing world
Note: Global middle class consumption is defined here as household consumption between USD 10 and USD 100 PPP/day. Projections hold most recent distribution
constant (from PovcalNet database) and assume consumption equals income growth (projected by a Cobb-Douglas production function, a model of RER convergence
based on the Balassa-Samuelson model, and UN population projections).
Source: OECD (2011) calculations based on Kharas (2010).
Global middle class consumption 2000-2050
(% of total)
7
China and the middle income trap: What comes next?
Note: Global middle class consumption is defined here as household consumption between USD 10 and USD 100 PPP/day. Projections hold most recent distribution
constant (from PovcalNet database) and assume consumption equals income growth (projected by a Cobb-Douglas production function, a model of RER convergence
based on the Balassa-Samuelson model, and UN population projections).
Source: OECD (2011) calculations based on Kharas (2010).
1995 1994 2000 1988 1995 19881986
1993 1993 19991994 1997 1989 1998
19911987
2004
20042007 2000
20041996 1997
19982005
2005
20042008
19942005 2001 1998
13
15
17
19
21
23
25
27
Ch
ine
se
Ta
ipe
i
Cyp
rus
Cze
ch
Re
pu
blic
Fin
lan
d
Gre
ec
e
Ho
ng
Ko
ng
, C
hin
a
Ice
lan
d
Ire
lan
d
Isra
el
Ko
rea
Ne
w Z
ea
lan
d
Po
rtu
ga
l
Sin
ga
po
re
Slo
ve
nia
Sp
ain
Sw
ed
en
GD
P/c
ap
_P
PP
, a
t c
urr
en
t in
tern
atio
na
l d
olla
rs, th
ou
sa
nd
s
Transitions from Middle-Income to Advanced-Country Levels
Start of transition period End of transition period
Ever growing trade surplus? Middle income trap
8
History matters: Chinese economy in the long run
0 100
1 000
10 000
100 000
1 000 000
10 000 000
100 000 000
170
0
173
0
176
0
179
0
182
0
185
0
188
0
191
0
194
0
197
0
200
0
203
0
Comparative Levels of GDP, China and the United States, 1700-2030
(million 1990 International dollars)
USA
China
Source: OECD (2010), and Maddison (2007).
Gross Value Added and Labour Productivity in
Agriculture, 1952-2003 (Index 1952=1)
Value
added
Labour
productivity
9
Myth: The main source of China’s competitive advantage is cheap labour
0
10
20
30
40
50
60
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
Pe
rce
nt
of
GD
P
Investment in China
Investment in Fixed Assets
Gross fixed capital formation
0
10
20
30
40
50
60
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
Pe
rce
nt
a ye
ar
Return to Capital before and after taxes
Base case
Excluding urban residential housing, including inventories, before taxes
Excluding urban residential housing, including inventories, after taxes
Fixed Capital Investments in China as % of GDP
and Return to Capital (1980-2006)
Source: Bai, Chong-En. C. Hsieh and Y. Qian. “The Return to Capital in China”. NBER Working Paper 12775. National Bureau of Economic Research. December 2006. Based on China Statistical Yearbook.
10
Shifting Wealth and World Development
Shifting wealth and world
development
• Analogy: Compare the world
economy with a high jump event in
track and field athletics. With the
sustained growth of large emerging
economies, the world economy has
been moving from Straddle to Fosbury
technique. World economy is more
complex, but it can jump higher – grow
faster – than before.
• What will be the consequences of
Fosbury for low and middle-income
developing countries, the feet in the
metaphor?
11
Herfindahl-Hirschman Index of concentration
by Product
Note: Herfindahl-Hirschman index estimated as the squared sum of market shares of exports of country i to country j on all 4-digit levels of goods, corrected by the number of exported goods. Nomenclature SITC Revision 3, 2012.
Source: OECD Development Centre, based on Comtrade (2012).
The rise of China still poses the risk of overspecialisation for the region
12
Herfindahl-Hirschman Index of concentration
by destination
Note: Herfindahl-Hirschman index estimated as the squared sum of market shares of exports of country i to country j on all destinations, corrected by the number of country parrtners. Nomenclature SITC Revision 3, 2012.
Source: OECD Development Centre, based on Comtrade (2012).
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
Argentina Brazil Chile Costa Rica Colombia Dominican Republic
Mexico Peru
Latin America and Caribbean
1990 1995 2000 2005 2010
0
0.05
0.1
0.15
0.2
0.25
China Indonesia India Korea Malaysia
East Asia
1990 1995 2000 2005 2010
Latam more resilient by diversifying its export destinations
13
Export competition with China is relatively low, with some exceptions
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Thaila
nd
Hungary
Kore
a, Rep.
Mexic
o
Mala
ysi
a
United S
tate
s
Cze
ch R
epublic
Sin
gapore
Rom
ania
Indonesi
a
Turk
ey
Pola
nd
Phili
ppin
es
Bulg
aria
Cro
atia
Japan
India
Slo
vak R
epublic
Spain
Cost
a R
ica
Pakis
tan
Bra
zil
El Salv
ador
Colo
mbia
Guate
mala
Arg
entina
Peru
Uru
guay
Hondura
s
Russian…
Panam
a
Chile
Boliv
ia
Venezu
ela
Para
guayL
ow
com
pet.
H
igh c
om
pet.
Export Competition with China for selected countries (2000-09)
Note: CS and CC coefficients calculated with exports of country i and exports of country j (China).
Source: OECD Development Centre, based on WITS Database, 2012 .
14
What about competition in regional markets?
Trade Competition in South America (2000-08)
Note: CS and CC coefficients calculated with exports of country i and exports of country j to a specific region (in this case Latin America).
Source: OECD Development Centre, based on WITS Database, 2010.
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
Argentina Bolivia Chile Colombia Ecuador Peru Paraguay Uruguay Venezuela
Co
ef.
Sp
eci
aliz
atio
n (
(0-1
)
Brazil vs China Coef. of Specialization
15
Outline
1 Shifting Wealth: continuing despite hurdles
2 China and Latin America: recent dynamics
3 Overcoming the middle income trap
4 After the diagnostic: public policies to overcome the challenge
16
Economic growth has been relatively strong since 2003
- 6.0
- 4.0
- 2.0
0.0
2.0
4.0
6.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
LAC OECD
Source: Own calculations based on ECLAC (2011) and OECD (2011), forecast as of November 2011.
• No decoupling
LATAM is still high beta. Correlation with OECD
growth: 0.79
• But higher alpha?
Since 2004 LAC has grown 2.6 pps per annum
more than the OECD
Annual real GDP growth by region (in percent)
17
Fast recovery in LATAM with no impact so far on potential growth
Source: Own calculations based on ECLAC, OECD and World Bank data.
• Impact was strong
Peak to through: 4.6 pps in LATAM versus
5.3 in OECD
• But swift recovery in LATAM
GDP reached pre-crisis GDP:
- 6 quarters after peak in LATAM
- In the OECD it took 15 quarters.
2011 Q3 (last figure):
-LAC-7 is 8.2 pps above peak
- OECD just 2.6 pps
Average annual growth since through:
- 4.3% LAC-7
- 2.3% in OECD
Quarterly real GDP (seasonally adjusted) Peak = 100
90
92
94
96
98
100
102
104
106
108
110
t-4
t-3
t-2
t-1 t
t+1
t+2
t+3
t+4
t+5
t+6
t+7
t+8
t+9
t+1
0
t+1
1
t+1
2
LAC-7 OECD
18
The global risk cycle is a key driver of LATAM business cycle
-5
-4
-3
-2
-1
0
1
2
3
0
10
20
30
40
50
60
70
80
98 99 00 01 02 03 04 05 06 07 08 09 10 11
Common Factor LAC-7 growth (LHS)
VIX (RHS)
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
Argentina Brazil Chile Colombia Mexico Peru Venezuela
Common factor VIX
Source: Own calculations based on Datastream.
Quarterly LAC-7 growth (y/y) and VIX Simple correlation coefficients
19
What is explains this resilience: Good policies or good luck?
Three main factors explain the new dynamics in the region:
• A lesson learnt the hard way: sustainable fiscal policy & stable monetary policy
• Exposure versus resilience: the role of trade and financial openness
• The emergence of China: differences in head and tail winds within the region
20
Real channels: more exposure to external shocks
0.0
0.5
1.0
1.5
2.0
2.5
1981 2007 1981 2007 1981 2007 1981 2007 1981 2007 1981 2007 1981 2007 1981 2007 1981 2007
ARG BRA CHL COL CRI DOM MEX PER VEN
Exports contribution to growth Trade openness Remittances
Source: OECD (2010).
Current account exposure index
Note: Each indicator is scaled between 0 and 1, with higher values indicating a larger exposure.
21
0.0
0.5
1.0
1.5
2.0
2.5
1981 2007 1981 2007 1981 2007 1981 2007 1981 2007 1981 2007 1981 2007 1981 2007 1981 2007
ARG BRA CHL COL CRI DOM MEX PER VEN
Current account deficit Debt/GDP Chinn and Ito index
External finance: more openness but mixed exposure
Source: OECD (2010).
Financial exposure index
Note: Each indicator is scaled between 0 and 1, with higher values indicating a larger exposure.
22
Recovery in Latin America: What explains it?
Relative Importance for LAC recovery
Note: Model includes leverage, exports, trade openness, BIS foreign claims to European banks, Chin-Ito
index, financial integration index, budget balance, public debt, current account balance, asset and
liabilities over GDP, net position,
Source: Avendano and Daude (forthcoming)
23
Recovery since the crisis & trade competition with China
Argentina
Bolivia
Brazil
Chile
Colombia
Costa Rica
El Salvador
Guatemala
Mexico
Panama
Paraguay Peru
Venezuela
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8Re
cove
ry s
ince
pre
-cri
sis
pe
ak (
% o
f p
eak
le
vel)
Coefficient of comformity (higher values = more competition with China)
Source: Datastream.
24
Solid fiscal positions are reflected by ratings
Source: Standard and Poor’s, 2012
25
…with diverging effects across the continent
80
85
90
95
100
105
110
115
120
125
130
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
South America Central America
Source: OECD (2012).
Terms of trade (2005 = 100)
26
Short-term outlook: economic growth
GDP growth in 2011 and monthly forecasts for 2012
Source: Consensus forecast.
Growth moderation for 2012
• Partly policy-induced
• Euro-area problems are responsible for 0.5
– 1.0 pps reduction.
• Mainly through lower external demand.
• Average growth forecasts:
LAC Total OECD
2012 3.7 1.6
2013 4.0 2.2
0
1
2
3
4
5
6
7
8
9
Argentina Brazil Chile Colombia Mexico Peru Venezuela
2011 growth Mar-11 Jun-11 Sep-11 Dec-11 Feb-12
27
Outline
1 Shifting Wealth: continuing despite hurdles
2 China and Latin America: recent dynamics
3 Overcoming the middle income trap
4 After the diagnostic: public policies to overcome the challenge
28
The product space - introduction
•The Product Space: network that formalizes the idea of relatedness (proximity) between products traded in the global economy.
•A complementary notion is that of value embedded in the good exported.
29
1968 2002
Product Space: The “Structure” of export profiles
Bangladesh Korea
garments
Number of exported goods: Number of exported goods:
EXPY: EXPY:
Potential EXPY: Potential EXPY:
54
6728 US$
5168 US$
53
7501 US$
5425 US$
30
Diversification vs Upgrading: Asia
• Large Asian markets: “45º line trackers”.
•Very low starting levels of diversification and sophistication (except CHN).
•The size of the economy allows for developing a wide array of capabilities.
•High diversification, although a more limited record in terms of upgrading.
Source: Jankowska, A. Nagengast, A., Perea, J.R. “The Product Space and the Middle Income trap: Comparing Asia and
Latin American Experiences. OECD Development Centre Working Paper No. 311.
31
•“2-stage structural transformers” (KOR, TWN): early and –at times- intense increase in diversification, to later focus on upgrading, while maintaining or even reducing the number of sectors where they participate.
•Smaller countries (SGP, MYS) unable to reach the same level of diversification, but successfully placing themselves in high Expy industries.
Diversification vs Upgrading: Asia
Source: Jankowska, A. Nagengast, A., Perea, J.R. “The Product Space and the Middle Income trap: Comparing Asia and
Latin American Experiences. OECD Development Centre Working Paper No. 311.
32
Central America follows a roughly similar pattern, with CRI reaching a higher stage in product sophistication.
Diversification vs Upgrading: Latin America
Source: Jankowska, A. Nagengast, A., Perea, J.R. “The Product Space and the Middle Income trap: Comparing Asia and
Latin American Experiences. OECD Development Centre Working Paper No. 311.
33
The puzzling cases, no gains in Expy.
ARG engages in the “wrong” kind of diversification, at times facing decreases in Expy.
CHL, PER: Lower gains in diversification, disassociated from gains in EXPY.
Diversification vs Upgrading : Latin America
Source: Jankowska, A. Nagengast, A., Perea, J.R. “The Product Space and the Middle Income trap: Comparing Asia and
Latin American Experiences. OECD Development Centre Working Paper No. 311.
34
Motivation: Proximity matters
Brazil
• Where are the new products that countries transition into?
•Transitions into new products are more likely, the closer the products are to currently exported goods
Source: Jankowska, A. Nagengast, A., Perea, J.R. “The Product Space and the Middle Income trap: Comparing Asia and
Latin American Experiences. OECD Development Centre Working Paper No. 311.
35
Transition analysis – “Structural transformers”
• Countries that did not substantially diversify, but transformed their export structure towards high value exports tended to transition into relatively proximate / median products (no evidence for a particularly high effort)
“low effort”
“high effort”
Source: Jankowska, A. Nagengast, A., Perea, J.R. “The Product Space and the Middle Income trap: Comparing Asia and
Latin American Experiences. OECD Development Centre Working Paper No. 311.
36
Transition analysis – “Diversifiers”
• Countries that substantially diversified their exports profiles tended to transition into relatively distant products (“high effort”)
“low effort”
“high effort”
Source: Jankowska, A. Nagengast, A., Perea, J.R. “The Product Space and the Middle Income trap: Comparing Asia and
Latin American Experiences. OECD Development Centre Working Paper No. 311.
37
Capabilities – Asia
• China: Start already with a high value, substantial gains in relative capabilities only from 1990 onwards. • General trend for other “diversifiers” – slow and gradual increase in relative capabilities with diversification.
• Only recently countries achieve capabilities that are close / above the world average.
world average
Source: Jankowska, A. Nagengast, A., Perea, J.R. “The Product Space and the Middle Income trap: Comparing Asia and
Latin American Experiences. OECD Development Centre Working Paper No. 311.
38
Capabilities – Latin America
• In general below average performance in Latin America.
• The exception being Mexico (high starting value) and slow increase across time) and the strongly diversifying Brazil (gradual increase in capability ranking over time).
world average
Source: Jankowska, A. Nagengast, A., Perea, J.R. “The Product Space and the Middle Income trap: Comparing Asia and
Latin American Experiences. OECD Development Centre Working Paper No. 311.
39
Adaptation strategies towards Chinese competition: Looking at the firm
Source: Alonso, A. Avendano, R. Estrada, J. “Adapting to the Rise of China: How Can Latin American Companies Succeed? ”. OECD/World
Economic Forum Working Paper. 2009.
High value-added niche to achieve global scale Products with high volatility and customization needs
40
Latin American companies have started to adapt to new value chains
Source: Alonso, A. Avendano, R. Estrada, J. “Adapting to the Rise of China: How Can Latin American Companies Succeed? ”. OECD/World
Economic Forum Working Paper. April 2008.
Upstream value chain integration
41
Outline
1 Shifting Wealth: continuing despite hurdles
2 China and Latin America: recent dynamics
3 Overcoming the middle income trap
4 After the diagnostic: policies to overcome the challenge
42
Next fiscal steps: reducing pro-cyclicality
-0.06
-0.04
-0.02
0.00
0.02
0.04
0.06
0.08
-0.30 -0.20 -0.10 0.00 0.10 0.20
Var
iati
on
of c
yclic
ally
ad
just
ed
pri
mar
y b
alan
ce
Output gap
MEX
CHL
URUARG
CRI PER
COL
BRA
-0.06
-0.05
-0.04
-0.03
-0.02
-0.01
0.00
0.01
0.02
0.03
0.04
-0.10 -0.05 0.00 0.05 0.10
Var
iati
on
of c
yclic
ally
ad
just
ed
pri
mar
y b
alan
ce
Output gap
Output gap and change in structural balance 1990 - 2009 Output gap and change in structural balance in 2009
Source: Daude et al (2011).
43
Education: focus on quality and equity
100
80
60
40
20
0
20
40
60
80
100A
rge
nti
na
Bra
zil
Ch
ile
Co
lom
bia
Me
xic
o
Pan
am
a
Pe
ru
Tri
nid
ad
an
d T
ob
ago
Uru
gu
ay
Lati
n A
me
rica a
nd
th
e
Cari
bb
ean
OEC
D
Pe
rce
nta
ge
of
stu
de
nts
Level 1 Below level 1 Level 2 Level 3 Level 4 Level 5
Distribution of test score in PISA reading tests, according to socioeconomic and
cultural household background quartiles, 2009
Source: Based on data from PISA 2009. Note: The distribution by performance levels in Latin America and OECD refers to the simple mean of attainment level weighted at the national level for participating countries in PISA 2009.
44
Innovation: Increase efforts to strengthen national innovation strategies
China
India
Russian Federation
South Africa
0
1
2
3
4
5
0 10 20 30 40 50 60 70 80 90
Inve
stm
en
t in
R&
D (%
of G
DP)
Investment in R&D financed by the private sector (%)
Latin America and the Caribbean OECD Other emerging countries
R&D Investment as percentage of GDP
45
0.0
500,000.0
1,000,000.0
1,500,000.0
2,000,000.0
2,500,000.0
3,000,000.0
Value Initial Contract Value Renegotiations
Value including
renegotiations
Infrastructure: beyond resources, better regulation and coordination
Source: Bitrán E., S. Nieto-Parra and J.S. Robledo (2011). Note: Values in Millions of constant Pesos of Dic/09
Colombia: Cost increase from renegotiations
46
Summing up
• Shifting Wealth is an established phenomenon with sustained effects, and Latin
America needs to position in it.
• LATAM resilience: countries have built more buffers. Financial and trade openness
have increased exposure to external shocks.
• Adaption strategies to Chinese competition are heterogeneous, depending on the
sector and firms and country capabilities.
• Overcoming the “middle income trap” that Latin America is facing requires active
public policies in innovation, education and infrastructure.
• Breaking away from the middle income trap has, almost always, encompassed an
upgrading of the export base towards manufacturing.
47
• Not all policies are right at all moments in time for all countries. The future of SW: which policies?
• Crucial: activate both within-sector productivity and cross-sector productivity rises.
• Competitive exchange rates, industrial & innovation policies, forced savings, flow restrictions and directed finance can be helpful for specific clusters of countries.
• OECD ‘Going for Growth’ policy prescriptions can be counterproductive for countries below certain income thresholds. How do we tell Big Brother?
The Future of Shifting Wealth: Policies
48
Thank you!
www.oecd.org/dev
49
ANNEX
50
Access to Finance: A priority for firms
Domestic Credit to Private Sector (share of GDP)
Source: World Bank WDI
51
Inflation remains low, stable and predictable in IT economies
-10-505
10152025303540
1/1
/20
07
6/1
/20
07
11
/1/2
00
7
4/1
/20
08
9/1
/20
08
2/1
/20
09
7/1
/20
09
12
/1/2
00
9
5/1
/20
10
10
/1/2
01
0
3/1
/20
11
8/1
/20
11
1/1
/20
12
CP
I ch
ange
(Yo
Y)
Inflation - Targeting countries
Brazil Chile ColombiaMexico Peru
-10-505
10152025303540
1/1
/20
07
6/1
/20
07
11
/1/2
00
7
4/1
/20
08
9/1
/20
08
2/1
/20
09
7/1
/20
09
12
/1/2
00
9
5/1
/20
10
10
/1/2
01
0
3/1
/20
11
8/1
/20
11
1/1
/20
12
CP
I ch
ange
(Yo
Y)
Inflation - Non targeting countries
Argentina Venezuela
Source: Datastream.
52
In inflation targeting economies monetary policy was used counter-cyclically
0
5
10
15
20
25
1/1
/20
07
6/1
/20
07
11
/1/2
00
7
4/1
/20
08
9/1
/20
08
2/1
/20
09
7/1
/20
09
12
/1/2
00
9
5/1
/20
10
10
/1/2
01
0
3/1
/20
11
8/1
/20
11
1/1
/20
12
rate
(%)
Interest rates - Targeting countries
Brazil Chile Colombia
Mexico Peru
0
5
10
15
20
25
1/1
/20
07
6/1
/20
07
11
/1/2
00
7
4/1
/20
08
9/1
/20
08
2/1
/20
09
7/1
/20
09
12
/1/2
00
9
5/1
/20
10
10
/1/2
01
0
3/1
/20
11
8/1
/20
11
1/1
/20
12
rate
(%)
Interest rates - Non targeting countries
Argentina Venezuela
Source: Datastream.
53
Source: Datastream.
…without losing credibility
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
Brazil
0.0
1.0
2.0
3.0
4.0
5.0
ChileInflation (y-on-y)Expected inflation (12-months ahead)Target
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Colombia
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0Mexico
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Peru
54
The Chinese economy today: Technological upgrade
Source: Alonso, A. Avendano, R. Estrada, J. “Adapting to the Rise of China: How Can Latin American Companies Succeed? ”. OECD/World
Economic Forum Working Paper. 2009.
55
Medium term objective: Macro performance and risk perception
0
500
1000
1500
2000
2500
1/1
/20
07
7/1
/20
07
1/1
/20
08
7/1
/20
08
1/1
/20
09
7/1
/20
09
1/1
/20
10
7/1
/20
10
1/1
/20
11
7/1
/20
11
1/1
/20
12
bp
s
Spreads - Non inflation targeting
countriesArgentina Venezuela
0
100
200
300
400
500
600
1/1
/20
07
7/1
/20
07
1/1
/20
08
7/1
/20
08
1/1
/20
09
7/1
/20
09
1/1
/20
10
7/1
/20
10
1/1
/20
11
7/1
/20
11
1/1
/20
12
bp
s
Spreads - Inflation targeting countriesBrazil Chile Colombia
Mexico Peru
Source: Datastream.
56
Fiscal policy does little to reduce inequalities in Latin America
• Tax revenues are biased
towards non-progressive taxes
• In particular, personal income
tax is low in the region
• Low levels of social
expenditures
• Targeting could also be
improved 0.25
0.30
0.35
0.40
0.45
0.50
0.55
0.60
Arg
en
tin
a
Bra
zil
Ch
ile
Co
lom
bia
Me
xico
Pe
ru
OEC
D
Market income After taxes and transfers
0.25
0.30
0.35
0.40
0.45
0.50
0.55
0.60
Ch
ile
Me
xico
OEC
D
Market income
+ Cash transfers
- Income tax
+ Education (in-kind)
+ Health (in-kind)
Income inequality and fiscal redistribution effects of different policy instruments (GINI indices)
Source: OECD (2008a) for non-Latin American OECD countries, OECD (2008b) for Argentina, Brazil, Colombia and Peru, and estimations based on household surveys for Chile and Mexico.
57
The Product Space Map – Mexico - Hybrid
58
The Product Space Map- Brazil- diversifier
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