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The Quality of Life in Latin American Cities in Latin American Cities Javier Santiso Director and Chief Economist OECD Development Centre OECD Development Centre 26 September 2008 – Paris, France

The Quality of Life in Latin American Cities

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The Quality of Life in Latin American Cities

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Page 1: The Quality of Life in Latin American Cities

The Quality of Life in Latin American Citiesin Latin American Cities

Javier Santiso

Director and Chief EconomistOECD Development CentreOECD Development Centre

26 September 2008 – Paris, France

Page 2: The Quality of Life in Latin American Cities

I Why do we study Quality of Life in LAC now?I Why do we study Quality of Life in LAC now?

II Measuring Happiness and policy issuesII Measuring Happiness and policy issues

III Some thoughts for future researchIII Some thoughts for future research

Page 3: The Quality of Life in Latin American Cities

Why do we study Quality of Life in LAC now?y do e study Qua ty o e C o

The region has done well in terms of growth since 2003

Source: OECD Development Centre, 2008, based on IMF, WEO 2008

Page 4: The Quality of Life in Latin American Cities

Why do we study Quality of Life in LAC now?y do e study Qua ty o e C o

Entrenchment of macroeconomic stability

Source: OECD Development Centre, 2008 based on IMF, WEO 2008 and CEPALSTAT, 2008

Page 5: The Quality of Life in Latin American Cities

Why do we study Quality of Life in LAC now?y do e study Qua ty o e C oPoverty has been falling in most countries in the region

Source: OECD Development Centre, 2008 based on CEPALSTAT, 2008

Page 6: The Quality of Life in Latin American Cities

Why do we study Quality of Life in LAC now?y do e study Qua ty o e C oDespite improvements in many countries, inequality remains high

Source: OECD Development Centre, 2008, based on CEPALSTAT.

Page 7: The Quality of Life in Latin American Cities

Why do we study Quality of Life in LAC now?y do e study Qua ty o e C o

… and there is little redistribution through taxes and transfers

Inequality before and after taxes and transfers The effects of taxes and transfers

cien

t

ini c

hang

e

n in

equa

lity)

Gin

i coe

ffic

Poi

nts

of G

i

(% c

hang

e in

(

Source: OECD Development Centre, 2007. Based on data by  Goñi, López, and Servén (2006)

Page 8: The Quality of Life in Latin American Cities

Why do we study Quality of Life in LAC now?y do e study Qua ty o e C o

Perceptions also point towards limited opportunities

Page 9: The Quality of Life in Latin American Cities

Why do we study Quality of Life in LAC now?y do e study Qua ty o e C o

• Macroeconomic instability, insufficient growth and poverty havebeen dominating the development agenda for the region.

• The current bonanza might be behind the shift in the focus ofgattention to other issues, such as the quality of life and happiness.

• Lack of opportunities and inequality (perceptions and reality) might• Lack of opportunities and inequality (perceptions and reality) mightbe related to quality of life, limiting development also in this aspect.

Page 10: The Quality of Life in Latin American Cities

I Why do we study Quality of Life in LAC now?I Why do we study Quality of Life in LAC now?

II Measuring happiness and policy issuesII Measuring happiness and policy issues

III Some thoughts for future researchIII Some thoughts for future research

Page 11: The Quality of Life in Latin American Cities

Quality of Life in LAC citiesQua ty o e C c t es

• The case studies compiled in this book make a relevant contributionto the literature and policy debate on:

– Measurement of quality of life

– Valuation of public services: interesting combination of hedonic pricingd lf d fand self-reported satisfaction

– Nice illustration of how self-reported satisfaction surveys couldpotentially be used to shape and monitor public policies

• “Stylized” facts on cities in Latin America:– Insecurity and crime is a major concern

i i li f b lif ( bli d d i )– Segregation in quality of urban life (access to public goods and services)is a concern. It could exacerbate inequality beyond income.

Page 12: The Quality of Life in Latin American Cities

Security and CrimeyOther sources of information confirm concerns in terms of

perceptions and self-reported victimization

ArgentinaVenezuela50

2 m

onth

s

g

BrazilChile

ColombiaCosta Rica

Ecuador

Guatemala

Honduras

MexicoParaguay

Peru

Uruguay

40ve

) vic

tim in

last

12

Costa Rica

Dominican RepublicNicaragua

2030

en (o

r clo

se re

lativ

Panama

10%

that

has

bee

60 70 80 90Concerned about being victim of crime (%)g ( )

Source: OECD Development Centre, 2008 based on Latinobarometro, 2007.

Page 13: The Quality of Life in Latin American Cities

Crime and HappinessppCountries with high crime rates are less happy on average

AustriaAustraliaCanada

ColombiaDenmark

FinlandIrelandIceland

LuxemburgMalta MexicoNetherlandsNorway

PuertoRico

SwedenUnited States

85

Argentina

BelgiumBrazilChile

ChinaCzech Republic

Gernamy-WGermanyDominican RepublicSpain

France

United Kingdom

Greece

Croatia

IsraelItaly

Japan KyrgyzstanKorea, Republic of

New Zealand

Philippines

PolandPortugal

SingaporeSlovenia

El SalvadorUnited States

Uruguay Venezuela

67

x 19

95 -

2005

Albania

Azerbaijan

B l i

EstoniaEgypt

Hungaryo ea, epub c o

LithuaniaLatviaMacedonia

o a d

Romania

Russian Federation

Slovak Republic

5pp

ines

s In

dex

Armenia

BulgariaBelarusGeorgia

Moldova, Republic ofUkraine

34Hap

Source: OECD Development Centre, 2008 based World Database on Happiness , State of Nations, 2008.

-1 0 1 2 3 4Homicide Rate 1997 (in logs)

Page 14: The Quality of Life in Latin American Cities

Security and CrimeSecu ty a d C e

• In terms of policy issues the case studies clearly point towards• In terms of policy issues, the case studies clearly point towardsreducing crime and insecurity as a priority versus other public goods

• Di Tella et al (2008) show that perceptions on increased crime are• Di Tella et al (2008) show that perceptions on increased crime arecorrelated to perceptions of unfairness of markets, reducing thesupport for reform

• However, it is not straightforward to define the best policy:

– The roots of the problem might lie elsewhere. High inequality combinedwith lack of social mobility might create a sense of “futurelessness”.

– Should policies aim at reduction of crime or reduce perceptions? Thismight create ethical concerns and room for manipulationmight create ethical concerns and room for manipulation.

Page 15: The Quality of Life in Latin American Cities

Exclusion, Inequality and Happinessc us o , equa ty a d app ess

• Segregation in the access to291

Social expenditure by quintile in Latin Americag gpublic goods and servicesseems to be a consequence ofexclusion rather than due to

16820.7

29.1

25

00)

s

Education Health Social Security

differences in tastes

• This result is in line with the2.5 3.4 5.0

7.5

16.8

16.0 16.317.9

15

20

pend

ing

(=1

perc

enta

ges

evidence that often publicpolicies are poorly targetedand end up having a 8.2 7.9 7.8 8.0 8.0

5.2 5.0 5.1 5.2 4.3

5

10To

tal s

and

regressive impact on incomedistribution.

0Poorest

Quintile (Q1)Q2 Q3 Q4 Richest

Quintile (Q5)

Source: OECD Development Centre, 2007 based on ECLAC, 2005

Page 16: The Quality of Life in Latin American Cities

Exclusion Inequality and HappinessExclusion, Inequality and Happiness

• Inequality can be a signal ofincome mobility, but socialmobility in the region is low

Th l ti b t t l• The correlation between parentaland child educational attainmentis much higher in Latin Americathan in the US

• Graham and Felton (2005) showthat inequality (objectivemeasures as well as self-reportedperceptions) in Latin Americahas a large impact on self-reported wellbeing in particular

Source: Gaviria, 2008

reported wellbeing, in particulardue to lack of social mobility

Page 17: The Quality of Life in Latin American Cities

Inequality and Satisfaction with Democracy

100

High correlation between inequality and insatisfaction with the functioning of democracy

Luxemburg

Sweden

Denmark

Finland801

crac

y (%

)

AustriaNetherlands

FranceGermany

Sweden

BelgiumSpainGreece

UK

Ireland

60w

ith D

emoc

ChileArgentinaMexico BrazilColombia

Germany

ItalyPortugal

40Sa

tisfa

ctio

n

Peru20S

20 30 40 50 60Gini Index (after taxes and transfers)

Source: OECD Development Centre, 2008, based on Latinobarometro, 2008 Eurobarometro, 2008 and OECD Development Centre, 2007

Page 18: The Quality of Life in Latin American Cities

I Why do we study Quality of Life in LAC now?I Why do we study Quality of Life in LAC now?

II Measuring happiness and policy issuesII Measuring happiness and policy issues

III Some thoughts for future researchIII Some thoughts for future research

Page 19: The Quality of Life in Latin American Cities

Democracy and Happinesse oc acy a d app ess

Is there a link?

AustraliaAustria

BelgiumCanada

Colombia Denmark

El Salvador G

IrelandMexico NetherlandsN Z l d

NorwaySweden

Switzerland

United States

805

)AustraliaAustria

BelgiumCanada

Colombia Denmark

El Salvador GIrelandMexico NetherlandsN Z l dNorwaySweden

Switzerland

United States

805

)

Argentina

Belgium

BrazilChile

Czech RepublicDominican Rep

El Salvador

France

Germany

Greece

Hungary

Italy

Japan

New Zealand

PeruPoland Portugal

SpainUnited Kingdom

UruguayVenezuela

67

dex

(199

5 - 2

00

Argentina

BelgiumBrazil ChileCzech RepublicDominican Rep

El Salvador

France

Germany

Greece

Hungary

Italy

JapanKorea

New Zealand

Peru PolandPortugal

Slovak Republic

SpainUnited KingdomUruguayVenezuela

67

dex

(199

5 - 2

00

Turkey

45

Hap

pine

ss In

dSlovak RepublicTurkey

45

Hap

pine

ss In

d

3

20 40 60 80 100Vote Turnout (%) 1945 - 1998

3

0 2 4 6 8 10Institutionalized Democracy (Polity IV) 2007

Source: OECD Development Centre, 2008, based on Polity IV, 2007; IDEA Database on Vote Turnout, 2008, and World Database on Happiness , State of Nations, 2008.

Page 20: The Quality of Life in Latin American Cities

Tax Morale, Democracy and Happinessa o a e, e oc acy a d app ess

• A problem in the region is thatl d h h ipeople do not trust that their taxes

are spend in the right way.

There is also evidence that a better• There is also evidence that a betterfunctioning of democracy increasesthe tax morale of citizens (e.g.Torgler, 2002; Feld and Frey, 2002)g y

• Thus, the challenge is to createsynergies of tax and governmentspending reforms with politicalreforms, such that programs havesupport and funding.

Page 21: The Quality of Life in Latin American Cities

ConclusionsCo c us o s

• Development implies deep transformations of the economy as well asthe society.

• In this sense, the new focus on quality of life is a welcomed effort to, q yinclude issues that often are left aside by development economists dueto their complexity. Development economics might finally “crossboundaries” (Hirschman, 1998).

• This volume shows an innovative way of using traditional tools and thenovel approach of happiness economics to shape public policy needed topp pp p p p yimprove the quality of life of people in Latin America.

Page 22: The Quality of Life in Latin American Cities

The Quality of Life in Latin American Citiesin Latin American Cities

Javier Santiso

Director and Chief EconomistOECD Development CentreOECD Development Centre

26 September 2008 – Paris, France