1. This topic is developed in OECD (2008b).
  2. The Polity democracy score relies on experts’ assessments along six dimensions which include qualities of executive recruitment, constraints on the executive, and the degree of openness of polities and political competition. See the website of the Polity IV project ( for more details.
  3. Nevertheless, the average index of almost 8.6 for Latin America and the Caribbean in 2008 is still below the average of 9.6 for OECD member countries (out of a maximum score of 10).
  4. Blyde et al. (2009).
  5. It is important to point out that perceived positions in the income distribution differ significantly from objective positions, with relatively rich individuals self-classifying themselves at lower income quintiles and the poor considering themselves relatively less deprived (see Chapter 1, and also Fajardo and Lora, 2010). However, it can be argued that in political views and actions it is the perceived position rather than the objective one that matters more.
  6. The differences between the different quintiles are statistically significant at conventional levels of confidence for both variables.
  7. For example Alesina and Angeletos (2005) and Gaviria (2007).
  8. The coefficient of variation, a measure of dispersion, is 0.44 for the middle sectors, compared with 0.52 for the affluent and 0.57 for the disadvantaged.
  9. Similar results are found for education. See Daude and Melguizo (2010) for more details.
  10. It is important to note, though, that for the POUM model to hold, certain premises are necessary: policies should be expected to persist, agents should not be very risk-averse, and those poorer than average should expect to become richer than average. Rodríguez (2004) proposes an alternative explanation for this effect, by which in societies where the rich can influence politics such that they do not pay taxes, the median voter will prefer low levels of taxation to reduce the incentives to rent-seeking.
  11. Przeworski (2007) generalises the case, pointing out that those without assets, even if they constitute a vast majority, either do not want to or cannot use their political rights to equalise wealth, incomes, or even opportunities. This may be due not only to their expectation of becoming rich, but also to ideological domination since the media are owned by the elite, or to difficulties the poor face in co-ordinating actions when they have heterogeneous preferences over non-economic aspects of life. In a somewhat similar vein, Chong and Olivera (2008) show that countries with compulsory voting exhibit lower income inequality. Therefore, since developing countries have relatively more unequal distribution of income, the authors support the promotion of compulsory voting by them.
  12. See Daude and Melguizo (2010). These results are in line with Torgler (2005).
  13. A recent example would be Brazil’s Ficha Limpa reforms of July 2010.
  14. Torgler (2005).
  15. Marcel (2008).
  16. The quality of these goods therefore has an important impact on the perception of how effectively public funds are used, and so willingness to pay taxes – the virtuous cycle, discussed in the preceding paragraphs. An important limitation of our approach, therefore, flows from the fact that the data in the household surveys do not capture differences in the quality of services, differences which could affect their value. Chapter 3 has shown that in education these differences are often large and could be material to the results presented here.
  17. In Brazil, for example, pensions are found to propel households with low or zero market income into high-income groups. For more details see Immervoll et. al. (2006).
  18. See also ECLAC (2009).
  19. It should be noted that poverty headcount levels differ significantly between Chile and Mexico. According to ECLAC (2009), for 2006 13.7% of all households in Chile were poor, while poverty is significantly higher in Mexico (31.7%).
  20. Using household surveys, only current income is considered and the results do not capture the dynamic distributive effects of public expenditure. Therefore, the long-run effects of education on wage earnings of the children currently in school are not included.
  21. This topic, and how it might be addressed, is discussed in detail in the 2009 edition of the Outlook (OECD, 2008b).


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