Center for Economic and Policy Research, April 2008
According to country and regional data from the World Bank for thirty-four growth spells of more thanforty percent in per capita GDP, over the last two decades, Venezuela ranks near the top in terms of poverty reduction for the amount of growth experienced. This is shown in Table 1 and Figure 1 below. The average income elasticity of poverty reduction for these growth spells is about one-third that of Venezuela. For low and middle-income countries as a group, growth from 1993-2004, per capita incomegrew by 46.7 percent, and the poverty rate was reduced by 20 percent. This is less than half the amountof poverty reduction per unit of per capita income growth that Venezuela achieved. This paper also attempts to clear up some of the conceptual confusion resulting from Rodriguez'serroneous comparisons, which conflated different concepts of the income elasticity of poverty reduction,in both the
article and the Wesleyan Working Paper. It is because of these errors thatRodriguez draws the conclusion, contradicted by the World Bank data, that Venezuela's poverty reductionhas been inadequate, relative to other countries, for the amount of economic growth achieved.
Contrary to Rodriguez's assertion that inequality has increased in Venezuela during the Chávez years,as measured by the Gini coefficient, the best available data shows a decline in inequality, with the Ginifalling from 0.4865 in 1998 to 0.42 in 2007. The INE's (National Institute of Statistics) methodology, which Rodriguez attacks, appears to be the same as that used by other research institutionsthroughout the world, including the Luxembourg Income Study and the Inter-AmericanDevelopment Bank. There is no reason to believe that the INE is “omitting the poorest householdsfrom the construction of an inequality index,” as Rodriguez asserts without evidence.
Rodriguez's attempt to redefine the official poverty rate in order to salvage his original argumentabout Venezuela's poverty reduction is methodologically flawed. He attempts to raise the poverty rateby taking into account shortages of some food items that have appeared over the last year and a half.But he does not take into account any increases in non-cash income of the poor that have occurred,some of which are substantial, including access to health care and education. Also, many of theshortages of food items to which he refers have recently receded.
Rodriguez's argument that the Chávez government has not delivered with regard to social spending also falls short. Real (inflation-adjusted) social spending per capita has tripled during the Chávezyears, taking into account his correction that eliminates most of PDVSA's spending that has beenclassified as social spending. As a percent of GDP, social spending has increased from 8.2 percent in1998 to 15.9 percent in 2006. Even if we adopt Rodriguez's definition of social spending as only including spending on health, education, and housing, this has increased from 5.7 percent in 1998 to10.1 percent in 2006. Also, from 1998 –2006, the share of public spending devoted to health, education, and housing rose from24.1 percent to 27.5 percent. This means that even by Rodriguez's definition of social spending, andaccepting his argument that all that matters is the share of public spending that is social spending, there isan increase during the Chávez years. But this paper argues that it is does not make sense to look only atthe share of health, education, and housing in total public spending, as Rodriguez claims.
This paper also takes issue with Rodriguez's research regarding Venezuela's national literacy campaign.Rodriguez claims he “found little evidence that the program had had any statistically distinguishableeffect on Venezuelan illiteracy.” We argue that the Venezuelan Households Survey, on which thisresearch is based, is too crude a measure of literacy to support this conclusion.