Box 1: Equity and Development: Political economy arguments for inclusion of minorities  A relatively egalitarian distribution of political power underpins the institutions that promote prosperity. Institutions clearly have distributional effects, and bad institutions often arise because they benefit some group or elite. Good institutions arise when checks are placed on the power of elites and when the balance of political power becomes more equal in society. Growth certainly can occur in societies in which these conditions do not apply. But the preponderance of evidence suggests that such growth is unsustainable (p. 124)  The growth elasticity of poverty reduction falls with greater income inequality. In other words, the impact (of the same amount of) growth on poverty reduction is significantly greater when initial income inequality is lower (p.9).  The cost-benefit calculus that policymakers use to assess the merits of various politics too often ignores the long-term, hard to measure but real benefits of greater equity. Greater equity implies more efficient economic functions, reduced conflict, greater trust, and better institutions, with dynamic benefits for investment and growth (p.3). In 2006, the World Bank focused its annual World Development Report on Equity and Development. Many of the findings of that report support the case that greater inclusion of minorities will achieve inclusive growth and improve development. Marginalised minorities often constitute the deepest pockets of inequity and thus impact significantly on growth prospects. Overcoming discrimination, empowering the marginalised and creating more equitable access to and distribution of power can increase productive capacity and strengthen public institutions that will more efficiently regulate markets. Among the key points made by the report are:  Different cultures and religions around the world may differ in important respects, but they all share a concern with equity and fairness (p.80).  More egalitarian distributions of political power and income are associated with sustained and enduring prosperity (p. 108).  Discrimination and stereotyping… have been found to lower the self-esteem, effort, and performance of individuals in the groups discriminated against. Those who expect to be discriminated against in a particular labour market…will tend to invest less in acquiring the type of human capital that the market rewards. This reduces their potential for individual growth and their ability to contribute to the economy (p.8). In response, a team of experts offered suggestions as to how the World Bank could use its role to impact on Breaking Out of Inequality Traps: Political Economy Considerations (2008), including:  Provide technical assistance on the distributional impact analysis of reforms, and encourage wide public dissemination of results to stimulate open debate.  Promote more equitable and antidiscriminatory policies, and set norms for policies to decrease horizontal (i.e. between groups) inequalities.  Support information campaigns that may improve public debate, and assist policy makers to elaborate better polices. Chapter 1: Minorities in Development:Making the Argument 5