On why we don’t see more work
- IO meets development
How does deposit insurance affect bank stability? This is a question that has been around for a while but has come up again after the global financial crisis. In response to the crisis, a number of countries substantially increased the coverage of their safety nets in order to restore market confidence and to avert potential contagious runs on their banking sectors. Critiques worry that such actions are likely to further undermine market discipline, causing more instability down the line. My earlier research on this issue suggests that on average deposit insurance can exacerbate moral hazard problems in bank lending, making systems more fragile. In other words, particularly in institutionally under-developed countries, banks have a tendency to exploit the availability of insured deposits and increase their risk, making the financial system more crises prone. This is ironic since deposit insurance is supposed to make the systems more stable, not less.
But what if the impact of deposit insurance on stability varies depending on the economic conditions? Does deposit insurance help stabilize banking systems by enhancing depositor confidence during turbulent times?
In a recent blog entry — Universal Pension, Yes, Regressive Funding, No — David Robalino posed a number of very interesting questions about the proposal that we develop in our book Better Pensions, Better jobs (a new flagship report from the Inter-American Development Bank) and elaborate in an earlier blog, It's Time for Universal Pension Coverage in Latin America.
In Pictures: China's annual human migration
Shanghai, China - Hundreds of millions of people, including migrant workers and students, will crisscross the country to reunite with their families during the Chinese Lunar New Year Festival. For most of them, it's the only time of the year when they can see their loved ones. Some 3.5 billion journeys will be made in just over a month, exacerbating existing problems with inter-city transport in China.
Saudi Deports Quarter Million Migrants in 3 Months
Saudi Arabia says it has deported "more than a quarter million" foreign migrant workers from the kingdom over the past three months.
India's Telegraph newspaper reports on a Q&A Kaushik Basu had recently with economist/filmmaker Suman Ghosh.
Nobel laureate Michael Spence writes on Project Syndicate about The Real Challenges to Growth.
World Bank President Jim Yong Kim shares his views on LinkedIn on how income inequality ought to be discussed at Davos.
As the world’s self-appointed steering committee gathers in Davos, 2014 is already shaping up as a big year for inequality. The World Economic Forum’s ‘Outlook on the Global Agenda 2014’ ranks widening income disparities as the second greatest worldwide risk in the coming 12 to 18 months (Middle East and North Africa came top, since you ask).
So it’s great to see ‘Working for the Few’, a really excellent new Oxfam paper by Ricardo Fuentes and Nick Galasso, tackling an issue best summed up by US Supreme Court Justice Louis Brandeis in the aftermath of the Great Depression, ‘We may have democracy, or we may have wealth concentrated in the hands of the few, but we cannot have both.’ i.e. the politics of inequality and redistribution.
The Brandeis quote is particularly relevant because this time really is different. After the 2008 global meltdown, we have not seen anything like the New Deal, in terms of redistribution or reform. The paper argues that this is because political capture by a small economic elite is much more complete this time around.