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  • Financing Social Policy

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  • Financing Social Policy

    Mobilizing Resources for Social Development

    Edited by

    Katja Hujo


    Shea McClanahan

  • UNRISD 2009

    All rights reserved. No reproduction, copy or transmission of thispublication may be made without written permission.

    No portion of this publication may be reproduced, copied or transmittedsave with written permission or in accordance with the provisions of theCopyright, Designs and Patents Act 1988, or under the terms of any licencepermitting limited copying issued by the Copyright Licensing Agency,Saffron House, 610 Kirby Street, London EC1N 8TS.

    Any person who does any unauthorized act in relation to this publicationmay be liable to criminal prosecution and civil claims for damages.

    The authors have asserted their rights to be identified as the authors of thiswork in accordance with the Copyright, Designs and Patents Act 1988.

    First published 2009 byPALGRAVE MACMILLAN

    Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited,registered in England, company number 785998, of Houndmills,Basingstoke, Hampshire RG21 6XS.

    Palgrave Macmillan in the US is a division of St Martins Press LLC,175 Fifth Avenue, NewYork, NY 10010.

    Palgrave Macmillan is the global academic imprint of the above companiesand has companies and representatives throughout the world.

    Palgraveand Macmillanare registered trademarks in the United States,the United Kingdom, Europe and other countries.

    ISBN 9780230576643 hardback

    This book is printed on paper suitable for recycling and made from fullymanaged and sustained forest sources. Logging, pulping and manufacturingprocesses are expected to conform to the environmental regulations of thecountry of origin.

    A catalogue record for this book is available from the British Library.

    A catalog record for this book is available from the Library of Congress.

    10 9 8 7 6 5 4 3 2 118 17 16 15 14 13 12 11 10 09

    Printed and bound in Great Britain byCPI Antony Rowe, Chippenham and Eastbourne

  • Contents

    List of Tables and Figures vii

    Foreword xiThandika Mkandawire

    Preface and Acknowledgements xiiKatja Hujo and Shea McClanahan

    List of Abbreviations and Acronyms xiv

    Notes on the Contributors xviii

    1 Introduction and Overview 1Katja Hujo and Shea McClanahan

    Part I Global Dimension: Paradigms and Resources 25

    2 Social Exclusion Policies and Labour Markets in Latin America 27Rubn M. Lo Vuolo

    3 Financing for Development: International Redistribution 53Isabel Ortiz

    Part II Taxation and Aid 87

    4 How Can the Financing of Social Services be Made Pro-Poor? 89Enrique Delamonica and Santosh Mehrotra

    5 Financing Developmental Social Policies in Low-IncomeCountries: Conditions and Constraints 115Alice Sindzingre

    6 Aid and the Financing of Public Social Sector Spending 141Oliver Morrissey

    Part III Mineral Rents 163

    7 Natural Resource Wealth, Development and Social Policy:Evidence and Issues 165Andrew Rosser

    8 Mineral Rents and Social Policy: The Case of the NorwegianGovernment Oil Fund 183Erling Holmy


  • vi Contents

    Part IV Social Insurance and Pension Funds 213

    9 Social Insurance (Pensions and Health), Labour Markets andCoverage in Latin America 215Carmelo Mesa-Lago

    10 Pensions and Pension Funds in the Making of a Nation-Stateand a National Economy: The Case of Finland 246Olli E. Kangas

    11 Provident and Pension Funds and Economic Developmentin Selected Asian Countries 264Mukul G. Asher

    Part V Remittances 291

    12 Remittances and Social Development 293Hein de Haas

    13 Remittances and Social Development: The LatinAmerican Experience 319Manuel Orozco

    14 Conclusions 353Katja Hujo and Shea McClanahan

    Index 362

  • List of Tables and Figures


    3.1 Net financial transfers to developing countries, 19952006(selected years/billions of dollars) 62

    3.2 International instruments to finance social policy 746.1 Determinants of social sector spending 1466.2 HDI, aid and social spending 1516.3 Infant mortality, aid and social spending 151A6.1 Some summary statistics 1608.1 GDP and individual consumption per capita measured in

    2000 prices and by PPP in 2000 (OECD=100) 1858.2 GDP: volume indices, 2000=100, and average annual growth

    rates 1858.3 GDP per capita measured in 2000 prices and PPP in 2000

    (average annual growth rates in per cent) 1858.4 Labour market participation for different age groups and

    hours of work in 2005 1878.5 Government expenditures and revenues in Norway (current

    prices/per cent of GDP) 1878.6 Macroeconomic development in the base scenario (average

    annual growth rates/per cent) 1998.7 GDP shares of government revenues and expenditures in the

    baseline scenario (per cent) 2018.8 Projected development in the number of pensioners,

    average annual benefits ex ante indexation and the labourforce in the baseline scenario 202

    8.9 Central Government Pension Fund Global (CPF), expectedreal return and Structural Non-petroleum Budget Deficit (SNBD)(billions NOK, current prices) 205

    9.1 Population groups difficult to cover by social insurance in LatinAmerica, 200104 (in percentages) 218

    9.2 Proportional size of groups difficult to incorporate andlegal and statistical pension coverage in selected countries,200004 221

    9.3 Social insurance pension coverage of the labour force byprivate and public contributory systems, based on activecontributors 223

    9.4 Social insurance health coverage of the total populationand the labour force in Latin America, 19842004 225

    9.5 Social insurance pension coverage of the population age65 and above in private and public systems, 200005 230


  • viii List of Tables and Figures

    10.1 Investments from the NP funds, 194057 (per cent) 25110.2 Investment portfolio of the Finnish pension funds,

    19972004 (per cent) 25710.3 Investment portfolios by investment categories in Finland

    and abroad, 200004 ($ billion) 25811.1 Macroeconomic indicators of selected Asian countries, 2006 26711.2 Demographic indicators in selected Asian countries 26811.3 Human development and competitiveness rankings of

    selected Asian countries 27011.4 Selected labour force indicators of sample countries,

    latest estimates 27011.5 Thailand: Contribution rates for the SSO schemes (per cent) 27812.1 Main phases in migration and development research

    and policies 29412.2 Relation between household migration stage, consumption,

    and investments 30213.1 Central America in the global economy, 2005 (US$ millions) 32113.2 Remittances and key economic indicators 32213.3 Remittances and other indicators 32313.4 Impact of remittances on Latin American and Caribbean

    economies 32413.5 Monthly income, not including remittances 32513.6 Amount of money received per remittance transaction 32613.7 Remittance expenditures on food by level of education 32713.8 Remittance expenditures on food by Haitian recipients,

    per every $100 received 32713.9 Remittance recipient families who regularly purchase

    meat and milk 32813.10 Remittance expenditures on health care by Haitian recipients,

    per every $100 received 32813.11 Origin of recipient household investments in health care

    in Guatemala 32913.12 Expenditures in hospital care by households with at least

    one member abroad 32913.13 Expenditures in medicine and laboratory tests 33013.14 Education and income of recipients who use remittances

    to fund education 33113.15 Remittance expenditures on education by Haitian recipients,

    per every $100 received 33113.16 Origin of recipient household investments in education

    in Guatemala 33213.17 Members of emigrants families who are currently attending

    a formal educational institution (in the home country) 33313.18 Expenditures in education by households with at least one

    member abroad 33413.19 Breakdown of expenditures in education 33413.20 Basic profile of five cities 338

  • List of Tables and Figures ix

    13.21 Monthly cost of living, income and remittances 33813.22 Business activities of local economies (number) 34013.23 Remittance recipient households 34013.24 Remittance recipients who have invested in a small business

    or have savings accounts (%) 34113.25 Education, health and finance institutions 34213.26 Type of school obligations people engage (%) 34313.27 Businesses operating in education-related activities 34313.28 Per capita tax revenue in selected Latin American and Caribbean

    countries, 19802004 (US$) 34413.29 Per capita expenditure in health and education (H&E) in selected

    Latin American and Caribbean countries, 19802004 (US$) 34413.30 OLS regression results on revenue 34513.31 OLS regression results on expenditures in health and education 34513.32 Percentage distribution of locations by type of business 347


    3.1 Regional wealth shares (%) 543.2 Official development assistance, 19902010 563.3 How official development assistance is used in

    sub-Saharan Africa 633.4 and 3.5 SWAPs in theory and practice 763.6 Securitizing workers remittances 783.7 The International Financial Facility 784.1 Complex causalities 1058.1 Government expenditures in per cent of GDP

    (current prices) 1888.2 The composition of total consumption (current prices) 1888.3 Decomposition of the growth in man-hours allocated

    to service provision by the local government sector.Index (1988=100) 189

    8.4 The composition of government consumption ofindividual services (per cent of GDP in 1999) 190

    8.5 The composition of government social secu