The Unassuming Economist

Source: Conversable Economist

In this recent blog, author Timothy Taylor discusses the perplexing question of slowing agricultural growth witnessed in several countries across the world in the past couple of years. He first analyzes what percentage of influence on agricultural growth is exerted by rising overall economic productivity in the country, and discovers that it is mostly low-income countries where the decline has been most profound. The column also provides explanations for this trend that are worth exploring.

The ongoing Covid-19 crisis, which is likely to exacerbate economic inequality within countries in the West and probably among countries worldwide (Furceri, Loungani, Ostry, Pizzuto, 2021), has reinstated the need for a thorough investigation into the causes and consequences of inequality. In a recent column for VoxEU CEPR, economists Guido Alfani, Victoria Gierok, and Felix Schaff discuss inequality in the context of Germany over the years.

This column reconstructs wealth inequality in Germany over five centuries and demonstrates potential leveling effects of catastrophes with the help of evidence from events like the Black Death and the Thirty Years’ War. They conclude with insights like the fact that inequality falls in the aftermath of epidemics only in the presence of extremely high mortality rates.

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Source: VoxEU CEPR

The informal sector, which accounts for nearly one-third of the GDP and employment in emerging and developing economies (EMDEs), has not only been the worst affected by the Covid-19 pandemic but is now also threatening to dampen economic recovery. Three features of the informal sector have compounded the damage of Covid-19 on activity: (i) their predominant presence in the service sector, (ii) limited savings and access to social safety nets, and (iii) the lack of effective policy support (Ohnsorge and Yu 2021).

This column assesses the impact of the pandemic on job losses in the informal sector of both manufacturing and service sectors of EMDEs and the impact of support policies rolled out by governments. Thus, recommendations call for facilitating access to finance for small firms, adopting cash transfer programs in the short run for countries with larger poor populations (Furceri, Loungani, Ostry, and Pizzuto, 2020), and using technology to reach the poor and informal workers.

Source: VoxEU CEPR

“The servicification of economic activity occurring across Africa has implications for the continent’s future. Using per capita nightlight luminosity as a proxy for economic development, this column finds a strong positive association between higher-skill services and economic growth that varies according to geography, institutions, technology, and market conditions. Data on the structure of employment in African economies reveal significant shifts in the composition of employment towards services across and within countries, and towards growth in service-related occupations across all sectors of the economy.”

The authors present new data on the composition of jobs in the services sector at the sub-national level in a sample of 13 African countries, describe how this has changed over time, and explain how employment in services correlates with indicators of economic development commonly used in the literature. Throughout their sample, they find that the share of agriculture in total employment declined through the decades but was offset by an equivalent increase in the share of services. They go on to dig deeper into aspects like characteristics of service sector employees and differing capacities of different services in supporting workers’ productivity.

Source: CESifo

In a new paper (2022), economists Davide Furceri, Prakash Loungani, Jonathan D. Ostry, and Pietro Pizzuto write about the challenges of ensuring sustainable levels of debt in the face of threats of rising inequality, low growth, and high unemployment, posed by the COVID-19 crisis.

Studying five major epidemics since the 2000s, they demonstrate that real GDP falls in the aftermath of a pandemic while inequality (as measured by the Gini coefficient) shoots up (Figure 1). Subsequently, they discuss the role of fiscal policy in managing inequality and the need to avoid hastening or prolonging generous support beyond need using appropriate policy measures.