In a world riddled with complexity, the simplicity of universal basic income grants (BIGs) is alluring: just give everyone cash. Excerpts of such radical concepts have been put in practice across the globe, with the launch of a pilot in Kenya, results from India, a coalition in Namibia, an experiment in Finland, a pilot in the Unites States, a referendum in Switzerland, and the redistribution of dividends from natural resources in Alaska and elsewhere.
Sir Anthony Atkinson, who was Centennial Professor at the London School of Economics and Fellow of Nuffield College at Oxford, passed away on New Year’s Day, at the age of 72. Tony was a highly distinguished economist: He was a Fellow of the British Academy and a past president of the Econometric Society, the European Economic Association, the International Economic Association and the Royal Economic Society. He was also an exceedingly decent, kind and generous man.
Although his contributions to economics are wide-ranging, his main field was Public Economics. He was an editor of the Journal of Public Economics for 25 years, and his textbook “Lectures on Public Economics”, co-authored with Joe Stiglitz in 1980, remains a key reference for graduate students to this day. Within the broad field of public economics, Tony published path-breaking work on the measurement, causes and consequences of poverty and inequality – from his early work on Lorenz dominance in 1970, all the way to his more recent joint work with Piketty, Saez and others on the study of top incomes. Over his 50-year academic career, he taught, supervised and examined a large number of PhD students, some of whom came to work at the World Bank at some point in their careers.
Income inequality has been a hotly debated topic in Egypt since the 2011 revolution. However, researchers remain divided over the “true” level of inequality in this country. A blog posted on Vox in August argued that inequality in Egypt was underestimated and could be better represented by using house price data to estimate the top end of the income distribution. This blog is a response to that article and seeks to clarify issues relevant to the measurement of inequality in Egypt and elsewhere.
The primary motivation for predicting data in economics, health sciences, and other disciplines has been to deal with various forms of missing data problems. However, one could also make a case for adopting prediction methods to obtain more cost-efficient estimates of welfare indicators when it is expensive to observe the outcome of interest (in comparison with its predictors). For example, consider the estimation of poverty and malnutrition rates. The conventional estimators in this case require household- and individual-level data on expenditures and health outcomes. Collecting this data is generally costly. It is not uncommon that in developing countries, where poverty and poor health outcomes are most pressing, statistical agencies do not have the budget that is needed to collect these data frequently. As a result, official estimates of poverty and malnutrition are often outdated: For example, across the 26 low-income countries in Sub-Saharan Africa over the period between 1993 and 2012, the national poverty rate and prevalence of stunting for children under five are on average reported only once every five years and once every ten years in the World Development Indicators.
This is the third of three blog posts on recent trends in national inequality.
In earlier blogposts on recent trends in inequality, we had referred to measurement issues that make this exercise challenging. In this blogpost we discuss two such issues: the underlying welfare measure (income or consumption) used to quantify the extent of inequality within a country, and the fact that estimates of inequality based on data from household surveys are likely to underreport incomes of the richest households. There are a number of other measurement challenges, such as those related to survey comparability, which are discussed in Poverty and Shared Prosperity 2016 – for a focus on Africa, also see Poverty in a Rising Africa, published earlier in 2016.
When the Plantagenet kings ruled England (1154-1485), their primary means of securing wealth, prestige, and power was through territorial conquest. Fighting endless wars in France and dispatching armies as far as Jerusalem, the crown often had to finance foreign adventures through taxation -- sometimes crushing taxation – of subjects. The illegitimacy of such taxation only intensified the recurrent threat of domestic revolt. And through their demands for more accountable and inclusive governance, the English nobility succeeded, albeit with much blood shed over a span of centuries, to establish institutions and public policies conducive to economic development.
The previous blog post in this series described the trend in the global and regional averages of national inequality for the period 1988-2013. Now we dig deeper into the trends in inequality at the country level. We describe changes in national inequality during two periods – around 1993 to 2008 and around 2008 to 2013. The long-run spells include all countries for which we have data on inequality around 1993 and 2008, and that data is computed using the same welfare measure (income or consumption). The short-run spells include countries for which we have inequality data around 2008 to 2013; this list is based on the World Bank’s Global Database of Shared Prosperity.
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This is the first of three blog posts on recent trends in national inequality.
Inequality has featured prominently in the public debate in recent times. Media outlets highlight the apparent surge in the incomes of the richest, many books have been written on this issue, and numerous academic studies have attempted to assess the nature and magnitude of inequality over time. Most studies of inequality focus on the extent of inequality within a country; this makes sense since most policies operate at this level, too. Despite the attention this issue has received, it has been constrained by the quality of data on inequality. Household surveys collected by national authorities around the world are the most readily available source of data on inequality. However, compiling and harmonizing household surveys from different countries is extremely difficult as they are not always collected consistently or frequently enough. It is also well-known that household surveys often fail to capture the top tail of the distribution, as we will discuss in more detail in a future blog.
Economic shocks can be painful and destructive, especially in fragile countries that can get trapped into a cycle of conflict and violence. Effective policy responses must be implemented quickly and based on evidence. This requires reliable and timely data, which are usually unavailable in such countries. This was particularly true for South Sudan, a country that has faced multiple shocks since its independence in 2011. Recognizing the need for such data in this fragile country to assess economic shocks, the team developed a real-time dashboard to track daily exchange rates and weekly market prices (click here for instructions how to use it).
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As we worked on a new World Bank flagship report that provides the latest and most accurate estimates on trends in global poverty and shared prosperity, it became apparent as to what we wanted for the title - Poverty and Shared Prosperity 2016: Taking on Inequality.
Because in our minds it became clear that inequality is becoming increasingly critical to meeting the World Bank’s goals of ending poverty and sharing prosperity. In fact, we find that tackling inequality will make or break the goal of ending poverty by 2030.