The Unassuming Economist

From a paper by João Tovar Jalles, Carola Pessino, and Ana Cristina Calderon:

“Widening income disparities, higher corruption, and increased informality in many emerging market and developing economies (EMDEs)—all with pressing and mounting fiscal problems—have rekindled interest in the empirical analysis of the key factors determining the occurrence of fiscal consolidations. Using discrete choice models, this paper examines the drivers of fiscal consolidation episodes in a sample of 148 EMDEs between 1980 and 2019, with a focus on Latin American and Caribbean countries. Inequality does not seem to drive consolidations—which are more likely during good economic times—while more informality increases the probability of their occurrence and corruption decreases it. In turn, when examining the drivers of successful consolidations, larger income inequality acts as a boost, while informality is a hinderance. In fact, while the size of the public investment multiplier in Latin America and the Caribbean is larger than in other regions, when informality is high, the multiplier effect is reduced to a much lower and insignificant magnitude. Results are robust to several sensitivity and robustness tests.”

From a paper by Olufemi G. Onatunji:

“The growing imperative to attain equitable income distribution has compelled international organizations and the academic community to make a collaborative commitment towards alleviating the escalating income inequality experienced worldwide. While there has been a notable development of interest among scholars regarding the nexus between fiscal policy and income inequality, the empirical scrutiny on the contributing role of fiscal policy and institutional quality remains scant in the literature. The present study complements the existing literature by investigating the tripartite nexus between fiscal policy, institutional quality, and income inequality in SSA, which has received no empirical attention in the literature. This study utilizes an advanced econometric technique, the cross-sectional autoregressive distributed lag (CS-ARDL) approach, which addresses cross-sectional dependency and heterogeneity issues for the panel dataset during 1990–2015. The empirical results demonstrate that economic growth, population growth, and government tax exacerbate income inequality, whereas education, government expenditure, and institutional quality metrics mitigate income inequality in SSA countries in the short and long run. The findings also indicate that the performance of institutional quality settings in SSA is significant for fostering efficient fiscal policy, thus improving equitable income distribution. These findings offer substantial, valuable insights and policy implications for policymakers in SSA, which may inform the design and formulation of sustainable development strategies to achieve equitable income distribution.”

From a paper by Huan Huu Nguyen, Nam Anh Tran Nguyen and Phuong Thao Le Thi:

“This study uses public emotions shown through social media to identify public sentiment toward the current Russia-Ukraine war. Utilizing the development of natural language processing algorithms, this study tests the correlation between the public psychological factor and the fluctuation in financial markets and energy prices during the ongoing Russia-Ukraine war. This study emphasizes the public’s initial response to this event (from 1/2022 to 5/2022). It aims to evaluate the public sentiment on sudden shock instead of taking the incident comprehensively. The study results ascertain the public sentiment index contained from social media as a market indicator. During shock events such as the Russia-Ukraine war, public sentiment intensifies energy and financial asset price fluctuation, indicating that public psychology tends to be influenced by negative news and causes them to act accordingly, resulting in a sell-off in financial and energy markets.”

From a paper by Melike Bildirici, Özgür Ömer Ersin and Godwin Olasehinde-Williams:

“We argue that climate policy uncertainty can lead to a unique type of regulatory arbitrage whereby domestic firms respond to fluctuations between lax and stringent environmental regulations by relocating their production processes to jurisdictions with minimal environmental policies that could affect their profitability. The presence of uncertainty-driven environmental regulatory arbitrage may consequently contribute to the emergence of regions or countries that act as havens. This phenomenon could intensify internal carbon leakage, especially in economies with ambitious climate targets, as efforts to manage the risks associated with uncertain policies involuntarily result in increased carbon emissions elsewhere. Over time, this could lead to a rise in emissions displacement due to higher imports from abroad. To back up our claim with empirical evidence, we specifically study the internal carbon leakage in the EU15 countries resulting from the climate policy uncertainty. The analysis covers the period 1990–2022. A battery of econometric techniques is adopted—Fourier and conventional unit root tests, cointegration testing within the Fourier ARDL framework, short and long-run estimations within the Fourier ARDL framework, as well as Fourier Granger causality testing. By employing this battery of testing methodologies, we ensure robustness and thus the credibility of the study findings. Overall, after controlling for the effects of ecological innovation, environmental policy stringency, and the real GDP, we find that increases in climate policy uncertainty raise internal carbon leakage contemporaneously and that internal carbon leakage declines as climate policy uncertainty dies out over time in the long along with the short term. Furthermore, causality results reveal that climate policy uncertainty is a significant predictor of internal carbon leakage into the European Union. This study therefore identifies climate policy uncertainty as a potential source of idiosyncratic and systemic risk that aggravates internal carbon leakage as European Union products get replaced by more carbon-intensive imports.”

From a paper by Cong Minh Huynh, and Khanh Nam Pham:

“In a comprehensive study across 32 Asian countries and territories spanning 2002–2018, we unveil the surprising impact of uncertainty on income inequality. Contrary to conventional expectations, our analysis reveals a fascinating trend: heightened uncertainty appears to wield a dual impact on income distribution. While it diminishes the income shares of both the richest and the poorest segments of society, the reduction is far more pronounced among the wealthiest quintile. Surprisingly, this outcome leads to a lessening of income inequality. The results are robust with fixed effects, feasible generalized least squares, and especially panel vector autoregression (PVAR) to tackle endogeneity concerns. The findings imply that in a more stable environment, the rich enjoy a higher growth of income than the poor, while in higher uncertainty, the income of the rich drops more dramatically than that of the poor. Thus, policymakers should take this into consideration for appropriately making income redistribution policies during normal and crisis periods, especially considering the varying impact of uncertainty on different segments of society.”