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Spending on bling: What explains the demand for status goods?

Martin Kanz's picture

When people spend money, their decisions are often influenced by the desire to signal wealth and attain social status. This insight is not entirely new – even Adam Smith, in the Wealth of Nations, complains that his contemporaries spend too much on “status goods” that are not a necessity of life, and which they most likely can’t afford.

Social signaling motives in consumption seem to be present in many different economic settings, and may in fact be so widespread that they can be linked to larger economic phenomena, such as inequality and persistent poverty. Studies using household surveys show, for example, that the poor around the world spend a strikingly large share of their income on visible expenditures, which may have negative implications for asset accumulation, household indebtedness, and investments in education.The same pattern has been shown to hold for ethnic minorities in the Unites States – so much so, that a recent study argues that differences in conspicuous consumption may account for as much as one third of the wealth gap between Whites and African Americans

Rejuvenating regionalism

Aaditya Mattoo's picture

Regionalism can have three dimensions:  trade integration, regulatory cooperation and infrastructural coordination.  In a thought provoking blog, Shanta Devarajan argues for a drastic shift in focus, away from trade and towards infrastructure.

Regional trade agreements do sometimes divert not just trade but attention from other beneficial forms of cooperation.  And what type of integration makes economic and political sense, in what sequence, differs across regions. But it would be wrong to exclude trade, to focus only on one dimension, and to ignore important new constraints and old questions.

Rural electrification: How much does Sub-Saharan Africa need the grid?

Michael Toman's picture

An intense debate continues on how best to provide electricity to the 1.1 billion people currently without access to it -- of whom 600 million are living in Sub-Saharan Africa, many of them in rural areas. According to a 2015 IEG evaluation, low-access countries received about 3.6 billion USD per year into the electricity sector from all sources over 2000 – 2014. The bulk of these funds has gone into extension of the traditional electricity grid. The IEG report also states that to achieve universal grid access in current low-access countries by 2030 will require over 17 billion USD per year, including about 12 billion USD per year for new transmission and distribution capacity.  An additional 20 billion USD per year will be needed to address current supply inadequacies and expand generation capacity to meet growing demand.  The largest share of this investment would be in Sub-Saharan Africa, given the size of the population without access and the challenges of making effective infrastructure investments there (Foster and Briceño-Garmendia, 2010).

Energy prices fell 6 percent in June — Pink Sheet

John Baffes's picture

Energy commodity prices declined 6 percent in June, led by a 7.5 percent plunge in oil, the World Bank’s Pink Sheet said.

Agriculture prices dropped nearly 2 percent, with most groups easing, including food and beverages (down 1 percent each) and raw materials (off 3.5 percent). Fertilizer prices gained 2 percent.

Metals and mineral prices slid 1 percent, led by an 8 percent tumble in iron ore prices. Precious metals prices increased 1 percent.

The Pink Sheet is a monthly report that monitors commodity price movements.

Adversity gets in the brain

Magdalena Bendini's picture

“Individuality is the product of both biological inheritance and personal experience,” said Professor Charles A. Nelson during a recent presentation at the World Bank. Professor Nelson has been studying neurobiological development and the effect of adversity on the brain for some time now (e.g., here and here). So we asked him to open the black box of brain development for us and help us understand what it all means to those of us working on ending extreme poverty and boosting shared prosperity. Below are some highlights from his talk.

Which features of procurement systems increase competition and reduce corruption?

Steve Knack's picture

Public procurement of services, works and supplies is estimated to account for 15-20% of GDP in developing countries, and up to 50% or more of total government expenditure. Efficient and effective procurement is vital to core government functions, including public service delivery and provision of infrastructure. Weaknesses in procurement systems can lead to large-scale waste of public funds, reduced quality of services, corruption, and loss of trust in government.

Human development accounting

Youssouf Kiendrebeogo's picture

The rate of change in human development outcomes varies considerably across countries over long periods of time, as reflected in the two histograms below (Figure 1). For 78 countries in the period 1980-2014, the percentage decline in child mortality was 3.39% on average, with a standard deviation of 1.36%, a smallest rate of 0.89% (Central African Republic) and a highest rate of 8.07% (Maldives). The average percentage increase in school enrollment was 3.35%, with a standard deviation 3.54%, a minimum of 0.37% (Georgia) and a maximum of 19.68% (Maldives). Similar patterns of cross-country variation are found when using alternative proxies for health and education outcomes.

Should emerging markets worry about U.S. monetary policy announcements?

Poonam Gupta's picture

Emerging economies are routinely affected by monetary policy announcements in the US. This was starkly evident on May 22, 2013, when Federal Reserve Chairman Ben Bernanke first spoke of the possibility of the Fed tapering its security purchases. This “tapering talk” had a sharp negative impact on financial conditions in emerging markets in ensuing days—their exchange rates depreciated, bond spreads increased, and equity prices fell; so much so that some of the countries seemed on the verge of a full-fledged balance of payments crisis. The event helps explain why issues related to the spillover of US monetary policy have gained prominence in recent contributions to the literature and in policy discussions (Rajan, 2015).

How can teachers cultivate (or hinder) students’ socio-emotional skills?

Paula Villaseñor's picture
Also available in: Spanish

Socio-emotional skills are the new hot topic in education. Governments, ministers of education, policymakers, education experts, psychologists, economists, international organizations, and others have been captivated by these skills and their contribution to students’ academic and life outcomes. The goal seems clear, but the way to achieve results is not so obvious. Most of the literature focuses on the impact of socio-emotional skills on different outcomes, while much less illuminates the specific mechanisms through which teachers can boost students’ socio-emotional development. 

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