The Unassuming Economist

Four years ago, at the World Economic Forum in Davos, IMF Managing Director Christine Lagarde warned of the dangers of rising inequality, a topic that has now risen to the very top of the global policy agenda.

While the IMF’s work on inequality has attracted the most attention, it is one of several new areas into which the institution has branched out in recent years. A unifying framework for all this work can be summarized in two words: Inclusive growth. 

We want growth, but we also want to make sure:

• that people have jobs—this is the basis for people to feel included in society and to have a sense of dignity;
• that women and men have equal opportunities to participate in the economy—hence our focus on gender;
• that the poor and the middle class share in the prosperity of a country—hence the work on inequality and shared prosperity;
• that, as happens, for instance when countries discover natural resources, wealth is not captured by a few—this is why we worry about corruption and governance;
• that there is financial inclusion—which makes a difference in investment, food security and health outcomes; and
• that growth is shared just not among this generation but with future generations—hence our work on building resilience to climate change and natural disasters.

In short, a common thread through all our initiatives is that they seek to promote inclusion—an opportunity for everyone to make a better life for themselves.

These are not just fancy words; a click on any of the links above shows how the IMF is making work on inclusion a part of its daily operations.

Inclusion is important, but so of course is growth. “A larger slice of the pie for everyone calls for a bigger pie” (Lipton, 2016). So when we push for inclusive growth, we are not advocating as role models either the former Soviet Union or present day North Korea—those are examples of ‘inclusive misery,’ not inclusive growth. Understanding the sources of productivity and long-run growth—and the structural policies needed to deliver growth—thus remains an important part of the IMF’s agenda.

Globalization and inclusion

The IMF was set up to foster international cooperation. Hence, to us, inclusion refers not just to the sharing of prosperity within a country, but to the sharing of prosperity among all the countries of the world. International trade, capital flows, and migration are the channels through which this can come about. This is why we stand firmly in favor of globalization, while recognizing that there is discontent with some of its effects and that much more could be done to share the prosperity it generates.

Higher growth should help address some of the discontent, as argued by Harvard economist Benjamin Friedman in his book, The Moral Consequences of Economic Growth. Friedman shows that, over the long sweep of history, strong growth by “the broad bulk” of a society’s citizens is associated with greater tolerance in attitudes towards immigrants, better provision for the disadvantaged in society, and strengthening of democratic institutions.

However, designing policies so they deliver inclusive growth in the first place will be a more durable response than leaving matters to the trickle-down effects of growth.

Policies for inclusive growth

♦  Trampolines and safety nets: “More inclusive economic growth demands policies that address the needs of those who lose out … Otherwise our political problems will only deepen” (Lipton, 2016). Trampoline policies such as job counseling and retraining allow workers to bounce back from job loss: they help people adjust faster when economic shocks occur, reduce long unemployment spells and hence keep the skills of workers from depreciating. While such programs which already exist in many advanced economies, they deserve further study so that all can benefit from best practice. Safety net programs have a role to play too. Governments can offer wage insurance for workers displaced into lower-paying jobs and offer employers wage subsidies for hiring displaced workers. Programs such as the U.S. earned income tax credit should be extended to further narrow income gaps while encouraging people to work (Obstfeld, 2016).

♦  Broader sharing of the benefits of the financial sector and financial globalization: We need “a financial system that is both more ethical and oriented more to the needs of the real economy—a financial system that serves society and not the other way round” (Lagarde, 2015). Policies that broaden access to finance for the poor and middle class are needed to help them garner the benefits of foreign flows of capital. Increased capital mobility across borders has often fueled international tax competition and deprived governments of revenues (a “race to the bottom leaves everyone at the bottom,” (Lagarde, 2014). The lower revenue makes it harder for governments to finance trampoline policies and safety nets without inordinately high taxes on labor or regressive consumption taxes. Hence, we need international coordination against tax avoidance to prevent the bulk of globalization gains from accruing disproportionately to capital (Obstfeld, 2016).

♦  ‘Pre-distribution’ and redistribution: Over the long haul, polices that improve access to good education and health care for all classes of society are needed to provide better equality of opportunity. However, this is neither very easy nor an overnight fix. Hence, in the short run, ‘pre-distribution’ policies need to be complemented by redistribution: “more progressive tax and transfer policies must play a role in spreading globalization’s economic benefits more broadly” (Obstfeld, 2016).

From The Statesman:

“Lamenting the fact that the global growth rate at just over 3 per cent is the lowest since the turn of the century when an average of nearly 4 per cent prevailed till COVID pandemic, the G20 Troika of Brazil, India and South Africa on Wednesday observed that accelerating progress towards sustainable development goals (SDGs) requires inclusive digital transformation.

”Technology (also) is moving at dizzying pace, and if equitably deployed, affords us a historic opportunity to raise growth, reduce inequality and take one giant step towards bridging the gap in attaining the SDGs, three countries said in a joint communique, endorsed by several G20 countries, guest countries and international organisations which participated in the G20 Summit in Brazil.”

Continue reading here.

For conference proceedings of the international scientific conference KNOWCON 2020, click here.

Note that this post will be updated as links to papers and presentations become available. Last updated: 11:/20/2024

On Housing Cycles & Housing Affordability

• Identifying Housing Market Bubbles: Bespoke Bubbles for Diverse Market Structures
• The Effect of Local Stock Market Participation on Local Housing Prices
• Macro Shocks and Housing Markets
• Negative Capital Shock, Overseas Buyers, and Housing Market
• A Housing Portfolio Channel of QE Transmission
• Land Development and Frictions to Housing Supply Over the Business Cycle
• Competitive Human Capital Accumulation and Housing Prices
• The Channels of Amplification: Dissecting the Credit Boom that led to the Global Financial Crisis
• Fiscal Stimulus Payments, Housing Demand, and House Price Inflation
• A Tale of Two U.S. House Price Booms
• Capital Flows, Income Inequality, and Housing Prices

On Housing Supply

• The Effects of Neighborhood Redevelopment on Housing Markets and Beyond: Evidence from HOPE VI Revitalization Programs
• The Housing Supply and Price Effects of Reducing Parking Requirements in U.S. Cities
• Housing regulation
• The Effects of Floodplain Regulation on Housing Markets
• Tax Incentives and the Supply of Low-Income Housing
• The Housing Supply and Price Effects of Reducing Parking Requirements in U.S. Cities

Housing Wealth and Mortgages

• When Prejudice Hits Home: Hate Crime and the Market for Mortgage Credit
• Intergenerational Mobility and Housing Wealth in the United States
• Mortgage Lock-in, Life-cycle Migration, and the Welfare Effects of Housing Market Liquidity
• Unlocking Mortgage Lock-In
• Real Estate Commissions and Homebuying
• Mortgage Credit and Housing Markets
• Land Use Regulation, Homeownership, and Wealth Inequality
• Reverse Mortgages, Housing, and Consumption: An Equilibrium Approach
• Effect of Credit Score Constraints on Mortgage Loans in the Housing Market
• Blockbusting and the Challenges Faced by Black Families in Building Wealth through Housing in the Postwar United States
• Does Homeownership Preserve Wealth for Low-Income and Minority Senior Households?
• Mortgage Seasonality, Capacity Constraints, and Lender Responses

On Environment and Housing

• (Re)labeling and Preference: Evidence from Air Quality Standards and Housing Markets in South Korea
• Home Prices Following a Climate Risk Information Shock
• Levees and Levies: Local Financing of Climate Infrastructure Maintenance and Housing Market Dynamics
• Flooded House or Underwater Mortgage? The Macrofinancial Implications of Climate Change and Adaptation
• Racial Housing Discrimination and Flood Risk

Spatial Economics

• Spatial Extrapolation in the Housing Market
• Dynamic Urban Economics
• The Spatial and Distributive Implications of Working-from-Home: A General Equilibrium Model
• Spatial Misallocation in Housing and Land Markets: Evidence from China

Insurance and Bargaining

• The Numbers Game: Effects of Listing and Counteroffer Pricing Format in Housing Bargaining
• The Winner’s Curse in Housing Markets
• Dual Credit Markets: Income Risk, Household Debt, and Consumption
• Eviction as Bargaining Failure: Hostility and Misperceptions in the Rental Housing Market
• Bidder Beware: Intergenerational Wealth Transfers and Overpayment in Housing Markets
• Risk Taking under Assimilation and Contrast: Theory, Experiments, and Applications
• Rent Guarantee Insurance
• Insuring Landlords

Discrimination

• Racial Housing Covenants: The Case of a Southern U.S. City
• LGBTQIA+ PEOPLE’S ACCESS TO HOUSING SERVICES IN THE CONTEXT OF ECONOMIC CONSTRAINTS: THE TÜRKİYE CASE
• Racial Differences in the Total Rate of Return on Owner-Occupied Housing
• Immigration Enforcement and the Local Housing Market: Evidence Using Fintech Data

Miscellaneous

• Impact of Institutional Owners on Housing Markets
• When the Levy Breaks: School Levies, Public Goods, and the Housing Market
• Does Opportunity Come with Trade-Offs? The Impact of Small Area Fair Market Rents on Search Outcomes
• Behavioral Lock-In: Aggregate Implications of Reference Dependence in the Housing Market
• Labor and Housing as Essential Links in the Critical Materials Supply Chain
• Institutional Investors in the Market for Single-Family Housing: Where Did They Come From, Where Did They Go?
• Equilibrium Multiplicity: A Systematic Approach using Homotopies, with an Application to Chicago
• Split Incentives and Energy Efficiency Investment: Evidence from the Housing Market
• Evidence on the Determinants and Variation of Idiosyncratic Risk in Housing Markets
• The Welfare and Targeting Impacts of Public Housing vs Vouchers: Lottery Evidence from Miami
• Horizon Risk in Renting: Evidence From a PropTech Rental Platform
• The Effects of Prevailing Wages on Affordable Housing Construction Costs in California
• The Impact of Unconditional Cash Transfers on Consumption and Household Balance Sheets: Experimental Evidence from Two U.S. States
• Mandatory Pension Saving and Homeownership
• Housing Demand and Remote Work

From a paper by Cintia Darma Yenti, Nathasya , Akmal Yusuf , and Erni Febrina Harahap:

“This research aims to analyze the factors that influence income inequality in West Sumatra Province. Some of the variables that are taken into consideration are: unemployment, education and poverty. The research uses secondary data from the Central Statistics Agency (BPS), using panel data regression analysis in 19 Regencies/Cities in West Sumatra Province, during 2017-2023. The selected research model uses the Fixed Effect Model (FEM). The research results show that: (1) the unemployment variable has a positive and insignificant effect on income inequality, (2) the education variable has a negative and significant effect on income inequality, (3) the poverty variable has a positive and significant effect on income inequality.”