The Unassuming Economist

From a paper by Hammed Adetola Adefeso:

“The study investigates the role of governance on financial development and inequality nexus in African economies. Based on the system-Generalised Method of Moments (sys-GMM) on 41 African countries from 2001-2020. The empirical findings from the study are: (1) income inequality is highly persistent in the African countries; (2) financial development has insignificant increasing impact on inequality; (3) the interactive terms of financial development with control of corruption and rule of law have increasing impacts on income inequality implying that when there is rule of law and corruption is under controlled, given an increase in financial development will further widen inequality in the region. The study concludes by advocating for the need of good governance before income inequality can be reduced in Africa.”

From a paper by Barbara Binder:

“The dissertation examines the impact of minimum wages on the development of income inequality in the USA from 1989 to 2018. In many post-industrial societies, income inequality in terms of disposable household income has risen significantly in recent decades. Since labor income is the primary income source for households in these societies, changes in wage structures can substantially influence household income distribution. Skepticism regarding minimum wages as a social policy tool remains high and is a subject of intense debate in both academia and politics.
In the USA, statutory minimum wages have increased in the median over the studied period due to state-level minimum wage hikes. Additionally, significant changes in social structure have had profound effects on the labor market and on the composition and income situations of households with minimum wage earners. Minimum wage earners are increasingly the primary contributors to household income, thus significantly determining household welfare. Concurrently, the U.S. welfare state has shifted towards targeting working individuals and their households. The income tax system has become one of the most important forms of government support, with tax refunds serving as an additional income source for households with low to moderate labor incomes. The study hypothesizes that the improved income situation of households with minimum wage earners has contributed to an increase in quantile values in the lower household income range, thereby reducing net household income inequality.
The analysis uses decompositions of unconditional quantile regressions to examine the contribution of households with minimum wage earners to changes in quantile values across the lower half of the income distribution. Various income concepts for measuring inequality and different model specifications are applied.
The results show that households with minimum wage earners, due to their improved income situations, significantly contributed to a slight increase of 1 to 2 percent in quantile values between the third and eighth percentiles of the overall population’s net household income distribution, thereby slightly reducing income inequality. This effect is somewhat stronger when households with minimum wage earners also benefit from tax refunds. These positive contributions fall below the commonly considered poverty threshold and are therefore often overlooked. Changes in redistribution systems over time did not affect the contribution of households with minimum wage earners to the income distribution. The inequality of household labor income is more strongly associated with the improved income situation of households with minimum wage earners, as quantile values in the lower range increased by approximately 5 percent. Interactions with redistribution systems thus persist, and the influence of minimum wages is mitigated when broader income concepts are considered.
These findings offer valuable insights for the discussion on the role of minimum wage policy in income inequality and its interaction with long-term developments in labor markets, welfare states, and the social structures of nations.”

From a paper by Knut Are Aastveit, Hilde C. Bjørnland, Jamie L. Cross and Helene Olsen Kalstad:

“After decades of a stable environment with low inflation in most advanced economies, global inflation rates surged unexpectedly during the pandemic and have remained elevated since. This paper demonstrates that inflation expectations have significantly amplified the global demand and supply shocks triggered by the pandemic, playing a crucial role in sustaining elevated inflation in the post-pandemic regime. We establish this finding by applying a structural vector autoregression model that includes various shocks to global demand and supply, along with domestic inflation and inflation expectations, across six economies: the United States, Canada, New Zealand, the Euro area, the United Kingdom, and Norway. First, we document that global demand and supply shocks in the oil market, as well as disruptions in global supply chains, have been major drivers of the recent inflation surge in all these economies. Then, through various counterfactual exercises, we demonstrate that inflation expectations generally amplify the transmission of global shocks to inflation — particularly in Canada, New Zealand, and the US during the post-pandemic period. As a result, managing inflation expectations should remain a crucial policy objective to mitigate their amplifying effects on inflation.”

From Caixin Global:

“Recent weeks have seen a flurry of multilateral diplomacy across South America. The 31st APEC Economic Leaders’ Meeting in Lima, Peru, and the 19th G20 Summit in Rio de Janeiro, Brazil, convened global leaders, including President Xi Jinping. The theme of the APEC meeting was Empowering, Inclusive, Growth, while the G20’s Rio Declaration emphasized fostering “strong, sustainable, balanced, and inclusive growth,” with the term “inclusive” appearing at least 10 times. This shared emphasis reflects a pressing global reality.”

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From a paper by Azzeddine Cheddad and Mohammed Mekidiche:

“This article analyzes the feasibility of inflation targeting (IT) in Algeria using data from Q1 2000 to Q4 2021. IT is widely used, although its efficacy in emerging areas, notably MENA, is disputed. Algerian monetary policy dynamics and the central bank’s response to inflation and production changes are examined using Taylor Rule and GMM. The Bank of Algeria appears to value interest rate smoothing above short-term economic instability. The central bank’s aggressive response to inflation goal deviations supports its price stability promise in an IT environment. The research shows a lower focus on production stability, possibly due to the oil-dependent economy and labor market rigidities. The study finds that Algeria’s monetary policy has IT aspects, but its efficacy depends on its economic setting and institutional architecture. To further comprehend Algeria’s macroeconomic stabilization efforts, future study should examine global economic circumstances, commodity price volatility, and monetary and fiscal policy. This study adds to the discussion on IT’s usefulness in emerging economies by highlighting the necessity to address economic conditions and institutional frameworks. IT may help stabilize prices in Algeria, but executing this monetary policy framework in a unique economic setting is difficult.”