The Unassuming Economist

From a new IMF working paper:

“China has experienced rapid economic growth over the past two decades and is on the brink of eradicating poverty. However, income inequality increased sharply from the early 1980s and rendered China among the most unequal countries in the world. This trend has started to reverse as China has experienced a modest decline in inequality since 2008. This paper identifies various drivers behind these trends – including structural changes such as urbanization and aging and, more recently, policy initiatives to combat it. It finds that policies will need to play an important role in curbing inequality in the future, as projected structural trends will put further strain on equity considerations. In particular, fiscal policy reforms have the potential to enhance inclusiveness and equity, both on the tax and expenditure side.”

A new IMF working paper finds that “employment protection legislations and large productivity differentials are the key drivers of Korea’s duality. […] well-calibrated flexicurity policies can significantly reduce duality and inequality and raise welfare and productivity. Notably, the introduction of all three pillars—flexibility, a strong safety net and active labor market policies—is critical for its success. If only one pillar is introduced it can result in negative side-effects and might not reduce duality.”

From a new paper by Jonathan Ostry:

“Ongoing work suggests several urgent priorities that seem likely to pay dividends in the form of inclusive growth. Public policies should provide income support for workers displaced by technological change or trade, as well as incentives and opportunities to learn new skills. Fiscal policies should safeguard the political legitimacy of the growth model by ensuring that regulations are not skewed in favor of the wealthy; steps could include increased taxation of rents and estates and cooperative efforts across jurisdictions to stem corporate tax avoidance, tax inversions, and the use of tax shelters. Authorities should also make more aggressive efforts to regulate financial markets to prevent insider trading and money laundering and ensure that regulations prevent unfair competition and crony capitalism, whether in industry, services, or even the media.”

“The task of policymakers is to ensure that the disadvantaged also have the opportunity to succeed in the modern, hyperglobalized economy, by designing reforms and globalization with an eye to their distributional effects. If they fail, progrowth reforms will lose political legitimacy, enabling destructive nationalist, nativist, and protectionist forces to gain further traction and undermine sustainable growth. The key to success will be to take preemptive action, rather than focusing solely, or even primarily, on ameliorative measures after the fact. Inclusive globalization need not be the same as unbridled globalization.”

A new IMF working paper “explores regional differences to shed light on drivers of participation rates at the state and metropolitan area levels. It documents a broad-based decline, especially pronounced outside metropolitan areas. […] it finds that metropolitan areas with higher exposures to routinization and offshoring experienced larger drops in participation in 2000-2016. Thus, areas with different occupational mixes can experience divergent labor market trajectories as a result of trade and technology.”

In a recent paper on labor mobility in the United States, Mai Dao, Davide Furceri and I show that the ability to migrate is not as immediate as previously supposed and has been weakening since the early 1990s. We also find that net mobility across states picks up during national recessions, this increase is driven more by a stronger population inflow into states that are doing better rather than stronger population outflow from states that are doing worse; the outflow occurs only toward the end of the recession.

See my previous post here and my paper here.

A new survey paper “takes stock of the literature on the relationship between central bank policies and
inequality.” It also notes the findings in my paper with Davide Furceri and Aleksandra Zdzienicka:

“Furceri et al. (2018) find that the effect of monetary policy shocks on income inequality is larger in countries with higher labour income shares in total income.”

“The impact of monetary policy shocks on inequality may vary over the business cycle. Furceri et al. (2018) find that contractionary monetary policy has stronger effects on income inequality during booms, while expansionary shocks have larger dis-equalizing effects during recessions.”

My paper is available here. For those who do not have access, the working paper version is available here.