LAC Poverty and Labor Brief, February 2014 : Social Gains in the Balance - A Fiscal Policy Challenge for Latin America and the Caribbean. / World Bank

In 2012, the Latin America and the Caribbean (LAC) region continued its successful drive to reduce poverty and build the middle class. Poverty reduction was accompanied by strong income growth of the bottom 40 percent of the population, the World Bank's indicator of shared prosperity. However, the recent economic slowdown and stagnation in inequality decline suggest that future social gains may be more difficult to achieve. Given the modest prospects ahead, the region's poverty reduction strategy needs to focus on restoring growth and preserving macroeconomic stability, while reinforcing the ability of less advantaged groups to participate in and contribute to growth. This report assesses two relevant policy areas: equity of fiscal policy and equal access to basic goods and services for children that open the opportunity for them to lead lives of their choosing. Drawing on results from the Commitment to Equity project, the report shows that fiscal policy remains an underused instrument in terms of level and incidence of taxation and spending. The Human Opportunity Index underscores that opportunities are expanding for children in the region, but large gaps remain in access and quality.

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