Breaking the Cycle: Inequality, Social Investment, and Human Capital in Latin America

Latin America has long lagged behind the East Asian Tigers in investment in education.  In particular, Latin American countries failed to invest heavily in public secondary education.  This has had costs both in terms of economic growth and inequality.  After some 20 years of democracy and particularly with the turn to the left, social investment in the form of increasing expenditures on education and health care and the spread of Conditional Cash Transfer Programs has received unprecedented attention.  The CCTs are based on the recognition that investment in the human capital of the next generation requires that poverty in the present generation be addressed.  We argue that in Latin America social investment, human capital stock and inequality and poverty are linked in a feedback causal process and present quantitative and qualitative evidence supporting our argument.