Beyond income: A multidimensional approach to tackling inequality
Beyond income: A multidimensional approach to tackling inequality World Bank
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Rising Income Inequality and the Importance of Sustainable Development Goals (SDGs)
In many developed and developing countries, rising income inequality has become a significant concern for social activists and policy makers. However, it is crucial to recognize that income is just one dimension of inequality. Inequality also exists in health, education, and social services, and these dimension-specific inequalities can either reinforce or dampen the impact of income inequality. Focusing solely on income inequality provides only a partial view of the overall inequality within a country, limiting the effectiveness of policy responses. Therefore, it is essential to consider the Sustainable Development Goals (SDGs) when addressing inequality.
The Impact of Multidimensional Inequality
To understand the impact of multidimensional inequality, let’s consider a hypothetical scenario. Imagine a country or region where the rich have access to the best public schools and hospitals, while the poor are limited to low-quality educational and healthcare facilities. Now, let’s consider an alternative scenario where the poor have access to top-quality public education and healthcare. In this case, the government implements a program to improve the quality of education in disadvantaged regions.
Assessing the impact of this intervention can be done in two ways. In the first scenario, the poor gain access to better quality schooling, resulting in higher test scores for their children. In the second scenario, the schools are improved for the rich. Under certain assumptions, we conclude that economic inequality would decline in the first case and rise in the second. However, income and health inequalities remain unchanged in both scenarios. Only education inequality is reduced compared to the pre-policy situation. This highlights the importance of considering interactions across different dimensions of inequality. Such effects provide valuable information on how people and societies experience inequality. Improving the quality of education for the poor can increase social mobility and help families escape poverty, thereby reducing income inequality. On the other hand, investing in education in affluent areas might lead to heightened political tensions and hinder economic growth.
Therefore, to accurately gauge the extent of economic inequality, it is necessary to develop measures of multidimensional inequality that account for these interactions. While significant progress has been made in measuring inequality across multiple dimensions, the policy impact of these measures has been limited.
New Measures of Multidimensional Inequality
In our recent paper, we propose new multidimensional inequality measures that are easily implementable and transparent, overcoming many deficiencies of existing measures. These measures follow a traditional two-stage format, aggregating dimensions first and then applying a unidimensional measure like the Gini coefficient to the distribution of aggregates. We demonstrate that only a linear form can be used for the aggregation of individual-level components. Previous studies have considered linear aggregation, but our paper is the first to select this structure based on the axiomatic properties of its associated measures. We show that multidimensional inequality can be expressed as a weighted average of specific inequalities and a non-negative term reflecting the relevant aspects of the joint distribution across dimensions.
Additionally, we develop a calibration approach based on data from an initial period and normative policy weights. Once the multidimensional inequality measure has been calibrated, it can be used to assess multidimensional inequality over time and, with additional assumptions, across different regions.
Application and Impact in Developing Countries
To illustrate the application of our methodology, we analyze changes in multidimensional inequality in Azerbaijan from 2016 to 2023. We use data from the Life in Transition Survey (LITS) conducted in the second (2016) and fourth (2023) rounds. The dimensions considered in our analysis are monthly per capita income, years of education, and subjective health assessment. The multidimensional inequality index is calibrated for 2016 using normative weights of ½ for income and ¼ for education and health dimensions.
Table 1 presents the specific and multidimensional inequality levels for Azerbaijan. The mean monthly per capita income increased by almost 59 percent from about 852 PPP dollars in 2016 to 1350 PPP dollars in 2023. However, this income growth was accompanied by an increase in income inequality, as measured by the Gini coefficient, which rose from 0.253 in 2016 to 0.339 in 2023. The average years of education and health self-assessment remained relatively stable. While the inequality in years of education grew, the inequality in health assessment slightly declined.
Table 1: Specific and Multidimensional Inequalities in Azerbaijan, 2016–2023
SDGs, Targets, and Indicators
1. Which SDGs are addressed or connected to the issues highlighted in the article?
- SDG 1: No Poverty
- SDG 3: Good Health and Well-being
- SDG 4: Quality Education
- SDG 10: Reduced Inequalities
The article discusses income inequality, health inequality, education inequality, and their impact on overall economic inequality. These issues are directly connected to the SDGs mentioned above.
2. What specific targets under those SDGs can be identified based on the article’s content?
- SDG 1.4: By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services, ownership, and control over land and other forms of property.
- SDG 3.8: Achieve universal health coverage, including financial risk protection, access to quality essential health-care services, and access to safe, effective, quality, and affordable essential medicines and vaccines for all.
- SDG 4.5: By 2030, eliminate gender disparities in education and ensure equal access to all levels of education and vocational training for the vulnerable, including persons with disabilities, indigenous peoples, and children in vulnerable situations.
- SDG 10.4: Adopt policies, especially fiscal, wage, and social protection policies, and progressively achieve greater equality.
The article highlights the need to address these specific targets to reduce inequality in various dimensions.
3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?
- Income inequality: Gini coefficient
- Health inequality: Self-assessment of health
- Education inequality: Years of education
The article mentions the Gini coefficient as a measure of income inequality. It also discusses the self-assessment of health and years of education as indicators of health and education inequality, respectively.
4. Table: SDGs, Targets, and Indicators
| SDGs | Targets | Indicators |
|---|---|---|
| SDG 1: No Poverty | Target 1.4: By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services, ownership, and control over land and other forms of property. | Gini coefficient (income inequality) |
| SDG 3: Good Health and Well-being | Target 3.8: Achieve universal health coverage, including financial risk protection, access to quality essential health-care services, and access to safe, effective, quality, and affordable essential medicines and vaccines for all. | Self-assessment of health (health inequality) |
| SDG 4: Quality Education | Target 4.5: By 2030, eliminate gender disparities in education and ensure equal access to all levels of education and vocational training for the vulnerable, including persons with disabilities, indigenous peoples, and children in vulnerable situations. | Years of education (education inequality) |
| SDG 10: Reduced Inequalities | Target 10.4: Adopt policies, especially fiscal, wage, and social protection policies, and progressively achieve greater equality. | Gini coefficient (income inequality) |
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Fuente: blogs.worldbank.org
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