The Unassuming Economist

One of the most visible stylized facts in contemporary inequality research is the association, across national economies, between measures of cross-section income inequality and intergenerational mobility or persistence. Recent publications of the National Bureau of Economic Research by Cholli and Durlauf (2022) and Durlauf et al (2022) seek to understand the relationship between cross-sectional income inequality and persistence of income across generations (the Great Gatsby Curve, named after Jay Gatsby, protagonist of F. Scott Fitzgerald’s infamous novel who broke through poverty to become a flamboyant millionaire). Five distinct classes of theories, including models on family investments, skills, social influences, political economy, and aspirations are developed, each providing a behavioral mechanism to explain the relationship. Theoretical models imply nonlinear relationships between parent and child status that are often ignored in practice and offer potentially different interpretations of the evidence of heterogeneity in mobility across locations, groups, and time. They conclude with a vision to combine theory with empirics to understand this phenomenon better.

In conversation with Bill Gale, Arjay and Frances Miller Chair in Federal Economic Policy and senior fellow at the Economic Studies Program, Brookings Institution…

In this episode of Econofact’s podcast, Gill discusses the impact of inequitable racial impacts of government policy. Some notable points include the following:

1. Race-blind policies are typically neither race neutral nor race fair because past injustices cast a shadow on current conditions. The absence of racist animus does not mean a policy is not racist.
2. The mortgage interest deduction which favors homeowners who are disproportionately wealthier and white is discussed as a case in point to explain the difference between equity and equality.
3. He discusses the critical race theory (seemingly race-neutral policies lock in the effects of past racism).

Click here to listen to the full podcast.

Source: Poverty Action Lab, Paris School of Economics

In 1997, the Mexican government designed the conditional cash transfer program Progresa, which became the
worldwide model of a new approach to social programs, simultaneously targeting human capital accumulation
and poverty reduction. This paper studies the differential long-term impact of children’s exposure to Progresa, 20 years after its launch. The two focus groups include (a) children who were in-utero or in their initial years of life, and (b) children who were transitioning from primary to secondary school.

Results show that children exposed to the program in their early childhood witnessed better educational attainment and labor market outcomes, and the study of impacts on the second group shows that even the short-term impact of the program was sustained in the long run. Positive impacts manifested as larger labor incomes, more geographical mobility including through international migration, and later family formation. Besides, results from this paper also confirm that while conditional cash transfers are helpful in enhancing the educational and nutritional development of children in their formative stages, there is still a need for complementary policies to be rolled out so that the full range of households (not just ones with infants at the time of program rollout) are able to realize the full range of newly available labor market opportunities.

Click here to be a part of the discussion on this paper.

Source: VoxEU CEPR

Abstract:

The real pay of typical workers has grown much more slowly than productivity over recent decades in several developed economies. This column uses data from the US and Canada to examine whether productivity growth actually benefits typical workers by raising their pay. The authors find strong evidence of linkage between productivity and pay in the US but more mixed evidence for Canada, possibly due to it being a smaller, more internationally open economy. Overall, the findings suggest that measures to boost productivity growth are important for raising pay for the average and typical worker.

Source: VoxEU CEPR

Despite the commitments of the 2021 UN Climate Change Conference, countries’ climate mitigation policies are not enough to meet their ambitious emissions reduction targets. This column puts forward a framework for designing comprehensive decarbonisation strategies that promote growth and social inclusion. A policy mix based on three components is needed: (1) emission pricing, (2) standards and regulations, and (3) complementary policies that offset distributional effects. A robust and independent institutional framework and credible communications campaigns are key to managing policy constraints and enhancing public acceptance of mitigation policies.