The Unassuming Economist

From a paper by Muhammad Waqas Khan, Mehmet Akif Destek, and Zeeshan Khan:

“In the recent times, the role of artificial intelligence in social, economic, and environmental decision-making is important. Artificial intelligence is considered a source of enabling countries to achieve sustainable development goals. The economic consequences of the introduction of artificial intelligence are mostly overlooked and yet to be explore empirically. This work aims to empirically determine the impact of artificial intelligence on income inequality in the pioneers of the field, i.e., the G7 economies. Also, it aims to explore the role of fiscal intervention in mediating the impact of artificial intelligence on income inequality in these economies. The panel data techniques such as the test for cross sectional dependence and the test for slope heterogeneity are used. Furthermore, CIPS is used to determine the level of integration of the variables in the model. Westerlund test for cointegration and granger causality test by Dumitrescu and Hurlin (2012) are also used in the study. Furthermore, CSARDL technique is used to find out the impact of artificial intelligence along with control variables on income inequality. The results show that artificial intelligence reduces income inequality in the G7 both in the short and the long run. The absolute value of the long-term coefficients is larger than those in the short run. Based on the empirical findings of the work, it is recommended that appropriate fiscal interventions are needed in the short run to sustain the income inequality reduction impact of artificial intelligence. However, in the long run such interventions can be counter-productive but the requisite skills to optimally utilize artificial intelligence should be imparted to individuals.”

From a paper by Monika Junicke, Jakub Mateju, Haroon Mumtaz, and Angeliki Theophilopoulou:

“This paper uses administrative labour market data from Czechia to investigate the heterogeneous effects of technology shocks. Using a FAVAR, the shock is identified using medium run restrictions `a la Uhlig (2004b). Workers on low wages reduce their hours in response to the shock, while the shock has a positive effect on hours for workers with wages at and above the median. Analysis of industrial and demographic groups indicates that the latter group is likely to consist of males, to be educated or to work in services.”

From The News:

“The distinction between market-friendly and business-friendly economic policies is critical in shaping economic growth and inclusiveness. Our government must recognise this difference to ensure that policies benefit not just a select group of businesses but society at large.

Planners must understand the nuances between these policy approaches. Market-friendly policies focus on creating competitive markets with minimal government intervention, prioritising efficiency and resource allocation driven by market forces. However, this approach carries risks of concentrating benefits among established players, potentially fostering monopolies or oligopolies.

In contrast, business-friendly policies aim to support businesses of all sizes, including small and medium enterprises (SMEs) and startups. These policies encourage entrepreneurship and innovation while fostering a level playing field through regulations and incentives. The ultimate goal is broad-based economic growth that benefits all segments of society.

Pakistan’s existing economic policies pose significant challenges. These often favour large corporations or well-connected businesses, sidelining SMEs and participants in the informal sector. Regulatory inefficiencies stemming from governance flaws, inconsistent enforcement and lack of transparency create uncertainty that deters smaller businesses. Access to capital remains a critical issue for SMEs. High credit costs and limited financial access hinder inclusive growth. Furthermore, weak infrastructure, including inadequate transportation, energy and digital access, disproportionately affects smaller enterprises.”

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From a paper by Washingtone Onyango, Socrates Majune, and Patricia Naluwooza:

“This study analyzes the effect of China’s import dominance on Africa’s structural transformation, measured through the Shapley decomposition approach. A pooled mean group Autoregressive Distributed Lag (PMG-ARDL) model is analyzed using panel data from 1995–2018 for 21 countries. We find that Chinese imports of goods and services, like those from the rest of the world, increase Africa’s structural transformation in the long-run. However, the magnitude of the coefficient for China is larger than that of the rest of the world for both goods and services (total). The Chinese impact on Africa’s structural transformation is mainly through capital goods and other commercial services (such as ICT, financial, and construction), whose coefficients are larger than those of the rest of the world. Imposing barriers on Chinese imports is not a viable option for African countries. Instead, they should pursue policies that enrich the manufacturing sector, including adopting an Africa-wide trade agreement.”

From Brookings:

“2025 will be a critical juncture for Africa’s trajectory. New political leadership in both the African Union and the United States coincides with the urgent need to meet the looming 2030 deadline for the Sustainable Development Goals, to accelerate implementation of the African Continental Free Trade Area, and to modernize and renew the African Growth and Opportunity Act—a cornerstone of the U.S. Africa trade relationship—currently set to expire in September 2025. Paired with an escalating climate crisis and the reverberations of conflict and global economic instability, these dynamics will require bold and coordinated policy action to address Africa’s unique challenges while leveraging its vast potential.

This special edition of Foresight Africa—the flagship annual report of the Africa Growth Initiative at Brookings—extends its focus from one year to five and offers cutting-edge insights and actionable strategies from heads of government, global institutions, continental and multilateral institutions, as well as leading Brookings scholars and other high-profile policymakers, business figures, and civil society leaders.

Together, the report’s six chapters offer a comprehensive vision for Africa’s next chapter—a future driven by African leadership, bold innovation, and inclusive growth.”

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