Abstract The widely applied “dollar-a-day” methodology identifies global absolute poverty as declining precipitously since the early 80’s throughout the developing world. The methodological underpinnings of the “dollar-a-day” approach have been questioned in terms of adequately representing equivalent welfare conditions in different countries and years. These key issues of measuring global poverty are addressed here using the concept of the bare bones consumption basket (BBB). This methodology pinpoints equivalent levels of welfare, both internationally and intertemporally. The results validate the critique against the “dollar-a-day” methodology, showing large variations in costs of BBB between countries and years, even when one explicitly allows for additional expenses such as education and health. This volatility represents the differential among the typically used average CPI and a price index which is more relevant to those living in absolute poverty. On a point estimate level, success in terms of the first Millennium Development Goal (MDG) appears marginal. Once uncertainty in the estimates is accounted for, the BBB poverty lines provide the ground to dispute MDG 1 early celebrations. While BBB absolute poverty remains at very low levels during the entire 1983–2014 period, it also demonstrates strong persistence throughout. On the contrary, the higher welfare level BBB derivative shows overall much less flattering poverty levels.
{"title":"Global Absolute Poverty: Behind the Veil of Dollars","authors":"M. Moatsos","doi":"10.1515/jgd-2016-0033","DOIUrl":"https://doi.org/10.1515/jgd-2016-0033","url":null,"abstract":"Abstract The widely applied “dollar-a-day” methodology identifies global absolute poverty as declining precipitously since the early 80’s throughout the developing world. The methodological underpinnings of the “dollar-a-day” approach have been questioned in terms of adequately representing equivalent welfare conditions in different countries and years. These key issues of measuring global poverty are addressed here using the concept of the bare bones consumption basket (BBB). This methodology pinpoints equivalent levels of welfare, both internationally and intertemporally. The results validate the critique against the “dollar-a-day” methodology, showing large variations in costs of BBB between countries and years, even when one explicitly allows for additional expenses such as education and health. This volatility represents the differential among the typically used average CPI and a price index which is more relevant to those living in absolute poverty. On a point estimate level, success in terms of the first Millennium Development Goal (MDG) appears marginal. Once uncertainty in the estimates is accounted for, the BBB poverty lines provide the ground to dispute MDG 1 early celebrations. While BBB absolute poverty remains at very low levels during the entire 1983–2014 period, it also demonstrates strong persistence throughout. On the contrary, the higher welfare level BBB derivative shows overall much less flattering poverty levels.","PeriodicalId":38929,"journal":{"name":"Journal of Globalization and Development","volume":"7 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-12-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1515/jgd-2016-0033","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66939951","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract A recent innovation in measuring inequality is the incorporation of adjustments to top incomes using data from tax authorities, revealing higher inequality. The thesis of this paper is that the incorporation of estimates of income from illicit financial flows (IFF), reflecting untaxed capital, may be as significant to national inequality – but with greater variation across countries. We propose a method of adjusting national inequality data for illicit flows, and present preliminary results. These estimates suggest that untaxed illicit flows could be as important as (taxed) top incomes to estimates of inequality – highlighting the importance of improving estimates of underlying illicit flows.
{"title":"Hidden Inequality: How Much Difference Would Adjustment for Illicit Financial Flows Make to National Income Distributions?","authors":"Alex Cobham, William Davis, G. Ibrahim, A. Sumner","doi":"10.1515/jgd-2016-0022","DOIUrl":"https://doi.org/10.1515/jgd-2016-0022","url":null,"abstract":"Abstract A recent innovation in measuring inequality is the incorporation of adjustments to top incomes using data from tax authorities, revealing higher inequality. The thesis of this paper is that the incorporation of estimates of income from illicit financial flows (IFF), reflecting untaxed capital, may be as significant to national inequality – but with greater variation across countries. We propose a method of adjusting national inequality data for illicit flows, and present preliminary results. These estimates suggest that untaxed illicit flows could be as important as (taxed) top incomes to estimates of inequality – highlighting the importance of improving estimates of underlying illicit flows.","PeriodicalId":38929,"journal":{"name":"Journal of Globalization and Development","volume":"7 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-12-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1515/jgd-2016-0022","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66939773","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This paper examines the social welfare bases of the measurement of income inequality among the inhabitants of the world. We develop a general family of global inequality indices which encompasses different concepts of global equity, from the cosmopolitan to the nationalist view. The analysis also provides an interpretation of the EU-wide inequality measures adopted in European statistics.
{"title":"Some Reflections on the Social Welfare Bases of the Measurement of Global Income Inequality","authors":"A. Brandolini, F. Carta","doi":"10.1515/jgd-2016-0007","DOIUrl":"https://doi.org/10.1515/jgd-2016-0007","url":null,"abstract":"Abstract This paper examines the social welfare bases of the measurement of income inequality among the inhabitants of the world. We develop a general family of global inequality indices which encompasses different concepts of global equity, from the cosmopolitan to the nationalist view. The analysis also provides an interpretation of the EU-wide inequality measures adopted in European statistics.","PeriodicalId":38929,"journal":{"name":"Journal of Globalization and Development","volume":"7 1","pages":"1 - 15"},"PeriodicalIF":0.0,"publicationDate":"2016-07-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1515/jgd-2016-0007","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66940118","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract We return to the traditional theme of the distributive consequences of international prices and trade policies, focusing on economies relatively abundant in natural resources with a large non-tradable-goods sector. Changes in international prices create an aggregate demand effect which impacts on the earnings of factors employed in the non-traded goods sector. We show that, in economies highly specialized in the production of tradable goods and where the import-competing sector is small, under standard assumptions, terms-of- trade shifts have a neutral effect on factor prices and thus lack distributive effects, quite differently from Stolper-Samuelson scenarios. In economies with sizable import-competing sectors and two “urban” productive factors (e.g. skilled and unskilled labor), changes in the terms of trade do induce distributional tensions through two channels: (i) the exogenous shift in the relative price of tradable goods, and (ii) the endogenous displacement of the demand for non-tradables. We illustrate how, according to the structure of the economy, different patterns of income distribution may arise. Next, we analyze the introduction of trade duties. Trade taxes change relative prices between tradable goods as a terms-of-trade shock does, but also introduce an additional demand mechanism, that depends on the use the government gives to the revenues. If the tax revenues are transferred back to the private sector, the resulting reallocation of spending favors those factors used intensively in the production of non-tradables.
{"title":"Income Distribution, Factor Endowments, and Trade Revisited: The Role of Non-Tradable Goods","authors":"Sebastian Galiani, D. Heymann, Nicolás E. Magud","doi":"10.1515/jgd-2016-0028","DOIUrl":"https://doi.org/10.1515/jgd-2016-0028","url":null,"abstract":"Abstract We return to the traditional theme of the distributive consequences of international prices and trade policies, focusing on economies relatively abundant in natural resources with a large non-tradable-goods sector. Changes in international prices create an aggregate demand effect which impacts on the earnings of factors employed in the non-traded goods sector. We show that, in economies highly specialized in the production of tradable goods and where the import-competing sector is small, under standard assumptions, terms-of- trade shifts have a neutral effect on factor prices and thus lack distributive effects, quite differently from Stolper-Samuelson scenarios. In economies with sizable import-competing sectors and two “urban” productive factors (e.g. skilled and unskilled labor), changes in the terms of trade do induce distributional tensions through two channels: (i) the exogenous shift in the relative price of tradable goods, and (ii) the endogenous displacement of the demand for non-tradables. We illustrate how, according to the structure of the economy, different patterns of income distribution may arise. Next, we analyze the introduction of trade duties. Trade taxes change relative prices between tradable goods as a terms-of-trade shock does, but also introduce an additional demand mechanism, that depends on the use the government gives to the revenues. If the tax revenues are transferred back to the private sector, the resulting reallocation of spending favors those factors used intensively in the production of non-tradables.","PeriodicalId":38929,"journal":{"name":"Journal of Globalization and Development","volume":"8 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-07-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1515/jgd-2016-0028","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66939898","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract The current era is characterized by simultaneous increase in many countries’ income inequalities and a decline in global inequality. People’s perception of inequality is shown to depend on how much they value absolute income vs. their national income position.
{"title":"Interaction of Global and National Income Inequalities","authors":"Branko Milanovic, J. Roemer","doi":"10.1515/jgd-2016-0023","DOIUrl":"https://doi.org/10.1515/jgd-2016-0023","url":null,"abstract":"Abstract The current era is characterized by simultaneous increase in many countries’ income inequalities and a decline in global inequality. People’s perception of inequality is shown to depend on how much they value absolute income vs. their national income position.","PeriodicalId":38929,"journal":{"name":"Journal of Globalization and Development","volume":"7 1","pages":"109 - 115"},"PeriodicalIF":0.0,"publicationDate":"2016-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1515/jgd-2016-0023","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66939822","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Amartya Sen’s famous study of famines found that people died not because of a lack of food availability in a country but because some people lacked entitlements to that food. Is a similar situation now the case for global poverty, meaning that national resources are available but not being used to end poverty? This paper argues that approximately three-quarters of global poverty, at least at the lower poverty lines, could now be eliminated – in principle – via redistribution of nationally available resources in terms of cash transfers funded by new taxation and the reallocation of public spending. We argue that the findings provide a rationale for a stronger consideration of some national redistribution for purely instrumental reasons: to reduce or end global poverty quicker than waiting for economic growth. We find that at lower poverty lines ending global poverty may now be within the financial capacities of most national governments of developing countries either in the form of potential new taxation or reallocation of existing public finances though this is not the case at higher poverty lines. In summary, reducing global poverty at lower poverty lines is increasingly a matter of national inequality.
{"title":"Global Poverty and Inequality: Is There New Capacity for Redistribution in Developing Countries?","authors":"Christopher Hoy, A. Sumner","doi":"10.1515/JGD-2016-0021","DOIUrl":"https://doi.org/10.1515/JGD-2016-0021","url":null,"abstract":"Abstract Amartya Sen’s famous study of famines found that people died not because of a lack of food availability in a country but because some people lacked entitlements to that food. Is a similar situation now the case for global poverty, meaning that national resources are available but not being used to end poverty? This paper argues that approximately three-quarters of global poverty, at least at the lower poverty lines, could now be eliminated – in principle – via redistribution of nationally available resources in terms of cash transfers funded by new taxation and the reallocation of public spending. We argue that the findings provide a rationale for a stronger consideration of some national redistribution for purely instrumental reasons: to reduce or end global poverty quicker than waiting for economic growth. We find that at lower poverty lines ending global poverty may now be within the financial capacities of most national governments of developing countries either in the form of potential new taxation or reallocation of existing public finances though this is not the case at higher poverty lines. In summary, reducing global poverty at lower poverty lines is increasingly a matter of national inequality.","PeriodicalId":38929,"journal":{"name":"Journal of Globalization and Development","volume":"7 1","pages":"117 - 157"},"PeriodicalIF":0.0,"publicationDate":"2016-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1515/JGD-2016-0021","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66939762","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract The recent proliferation of trade agreements and swelling membership of the WTO can be explained in part by the promise of faster growth and economic development that trade liberalization is supposed to deliver. But many countries enter into arrangements that fail to safeguard national health objectives. This article proposes some explanations by developing a formal model. It identifies a country’s trade negotiation capacity, the significance of its exports to its trade partners, and its public health status as important determinants of how sensitive its trade agreements are to its health concerns. Some examples are provided to illustrate the predictions of the model.
{"title":"Few and Far Between: Some Explanations of Health Provisions in Trade Agreements","authors":"S. Shahnawaz","doi":"10.1515/jgd-2016-0024","DOIUrl":"https://doi.org/10.1515/jgd-2016-0024","url":null,"abstract":"Abstract The recent proliferation of trade agreements and swelling membership of the WTO can be explained in part by the promise of faster growth and economic development that trade liberalization is supposed to deliver. But many countries enter into arrangements that fail to safeguard national health objectives. This article proposes some explanations by developing a formal model. It identifies a country’s trade negotiation capacity, the significance of its exports to its trade partners, and its public health status as important determinants of how sensitive its trade agreements are to its health concerns. Some examples are provided to illustrate the predictions of the model.","PeriodicalId":38929,"journal":{"name":"Journal of Globalization and Development","volume":"7 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-01-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1515/jgd-2016-0024","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66939830","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This paper analyzes the relationship between inequality and the current account, addressing the role of the functional distribution of income. Using panel data for 60 countries over the period 1975–2011, our results confirm that an increase in the wage share is associated with a decrease in the current account. We also analyze the effects of wage share on saving and investment, maintaining the same control variables. We find that the wage share is negatively correlated with saving and does not have a significant effect on investment. This result is consistent with the theories that connect higher wages with greater consumption and less saving. The relationship is stronger for developing economies, highlighting the structural differences between different groups of countries. Specifically, the relevance and sign of control variables like financial intermediation, fiscal balance, demographic ratios, capital account openness and growth expectations show important differences according to the level of development.
{"title":"The Impact of Income Distribution on the Current Account","authors":"J. Carrera, E. Rodríguez, Mariano Sardi","doi":"10.1515/jgd-2016-0012","DOIUrl":"https://doi.org/10.1515/jgd-2016-0012","url":null,"abstract":"Abstract This paper analyzes the relationship between inequality and the current account, addressing the role of the functional distribution of income. Using panel data for 60 countries over the period 1975–2011, our results confirm that an increase in the wage share is associated with a decrease in the current account. We also analyze the effects of wage share on saving and investment, maintaining the same control variables. We find that the wage share is negatively correlated with saving and does not have a significant effect on investment. This result is consistent with the theories that connect higher wages with greater consumption and less saving. The relationship is stronger for developing economies, highlighting the structural differences between different groups of countries. Specifically, the relevance and sign of control variables like financial intermediation, fiscal balance, demographic ratios, capital account openness and growth expectations show important differences according to the level of development.","PeriodicalId":38929,"journal":{"name":"Journal of Globalization and Development","volume":"7 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-01-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1515/jgd-2016-0012","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66940163","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract The presence of “holdouts” in recent sovereign debt swaps poses a challenge to bargaining models which assume all creditors to be homogeneous. We modify the Rubinstein “alternating offers” framework so as to accommodate exogenous creditor heterogeneity – specifically holdouts more patient than other bondholders. The “second best” equilibrium derived is an initial offer and an associated “lock-law” sufficient to tempt impatient creditors into a prompt bond exchange. This is followed by a delayed, but more generous, swap with the patient creditors, timed to take place when the lock-law expires. In practice, however, the presence of holdouts may be endogenous: they may be late-comers who buy distressed bonds with a view to litigating for the full face value plus their costs of waiting. Provisions for protecting other bond holders from the negative externality caused by such tactics are briefly discussed. However, where the judge has mandated good faith bargaining with holdout creditors, the bargaining outcome we derive may be useful to indicate a basis for compromise.
{"title":"Writing-Down Debt with Heterogeneous Creditors: Lock Laws and Late Swaps","authors":"S. Ghosal, Marcus Miller","doi":"10.1515/jgd-2015-0017","DOIUrl":"https://doi.org/10.1515/jgd-2015-0017","url":null,"abstract":"Abstract The presence of “holdouts” in recent sovereign debt swaps poses a challenge to bargaining models which assume all creditors to be homogeneous. We modify the Rubinstein “alternating offers” framework so as to accommodate exogenous creditor heterogeneity – specifically holdouts more patient than other bondholders. The “second best” equilibrium derived is an initial offer and an associated “lock-law” sufficient to tempt impatient creditors into a prompt bond exchange. This is followed by a delayed, but more generous, swap with the patient creditors, timed to take place when the lock-law expires. In practice, however, the presence of holdouts may be endogenous: they may be late-comers who buy distressed bonds with a view to litigating for the full face value plus their costs of waiting. Provisions for protecting other bond holders from the negative externality caused by such tactics are briefly discussed. However, where the judge has mandated good faith bargaining with holdout creditors, the bargaining outcome we derive may be useful to indicate a basis for compromise.","PeriodicalId":38929,"journal":{"name":"Journal of Globalization and Development","volume":"6 1","pages":"239 - 255"},"PeriodicalIF":0.0,"publicationDate":"2015-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1515/jgd-2015-0017","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66939869","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This paper reviews the IMF DSA (Debt Sustainability Analysis) framework. We first examine the concept of debt sustainability, and argue that the evaluation exercise necessarily entails putting into question market expectations embodied in yield spreads. When the views of the analyst on the capacity of debt repayment differ from the ones reflected in market interest rate premiums, the use of market interest rates for assessing debt sustainability leads to an inconsistency that will in turn bias the assessment. We then show that IMF projections for assessing debt sustainability have been repeatedly biased, which may have contributed to distort the timing of sovereign debt restructurings and the consequent processes of renegotiation. We conclude with a discussion on how the existing DSA framework could be improved.
{"title":"The IMF Debt Sustainability Analysis: Issues and Problems","authors":"Martin M Guzman, D. Heymann","doi":"10.1515/jgd-2015-0034","DOIUrl":"https://doi.org/10.1515/jgd-2015-0034","url":null,"abstract":"Abstract This paper reviews the IMF DSA (Debt Sustainability Analysis) framework. We first examine the concept of debt sustainability, and argue that the evaluation exercise necessarily entails putting into question market expectations embodied in yield spreads. When the views of the analyst on the capacity of debt repayment differ from the ones reflected in market interest rate premiums, the use of market interest rates for assessing debt sustainability leads to an inconsistency that will in turn bias the assessment. We then show that IMF projections for assessing debt sustainability have been repeatedly biased, which may have contributed to distort the timing of sovereign debt restructurings and the consequent processes of renegotiation. We conclude with a discussion on how the existing DSA framework could be improved.","PeriodicalId":38929,"journal":{"name":"Journal of Globalization and Development","volume":"6 1","pages":"387 - 404"},"PeriodicalIF":0.0,"publicationDate":"2015-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1515/jgd-2015-0034","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"66940099","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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