The Unassuming Economist

Source: VoxEU CEPR

“Rising inequality and firms’ market power pose challenges to the aims of inclusive growth and shared prosperity. Nevertheless, growth and equity need not be mutually exclusive. This column argues that economic dynamism is crucial for achieving sustained growth and more equal market outcomes (Figure 1). It shows that countries that experienced faster growth over the last four decades have lower market inequality in the 2010s. Policy should be aimed at supporting sophisticated export industries, fostering innovation and creative destruction, and promoting competition.“

Figure 1: Relationship between long-run economic growth and market inequality (1974-2014)

The IMF’s major book on policies to achieve inclusive growth was just published. The book is available here. 

This and the book, Confronting Inequality: How Societies Can Choose Inclusive Growth (Ostry, Loungani, Berg; 2019) together make a compelling case for why inequality matters for efficiency and what policies can foster inclusive growth. 

This week of the year 2021 is of prime significance for the world as leaders from across countries have gathered in Glasgow, Scotland for the CoP26 summit which is touted to be the biggest environment-based conference after the Paris Summit in 2015.

Besides the heads of states, more than a fifth of the major corporations in the world have pledged to reach the net-zero carbon emissions target by 2030. However, what is striking is how the role of women as climate leaders, investors, and influencers is largely missing from the mainstream discussion on emissions reduction. 

This report draws out interesting parallels between seemingly disparate objectives like climate change and diversity, that corporations must address as part of their journey towards a greener planet. It highlights the influence of greater gender equality on an enterprise’s climate outcomes, by having women in leadership positions to act as changemakers, as low-carbon product influencers, and climate-focused business investors.

Click here to read the full report.

Policymaking and research on perhaps some of the most pressing social issues in the contemporary world today, like poverty, inequality, access to resources, and related matters, is both blessed and plagued with the idea that additional evidence on people’s identities and information sets can radically transform the rate of success or failure of policies. 

Among other things, one such question has also been the irony of demand for redistributive and poverty alleviation programs not rising commensurately or even remotely as much with the ever-rising level of inequalities in the world. Many studies have attempted to explain this phenomenon by presenting the idea that poor people often have only limited knowledge about their relative deprivation viz other people in the economy. They also believe their income levels to approximately coincide with the average income level of the country, thus convincing themselves of the non-usefulness of any redistribution programs. 

This study, by Hoy and Mager, empirically tests some of these theories using randomized surveys and churns out some insightful observations. It redefines the idea of ‘benchmarking’ incomes for designing redistribution programs and explains the importance of information sets in shaping poor people’s preferences for accepting aid. 

Click here to read more.