There is a lot of public discussion about Thomas Piketty’s book on capital and its implications for inequality. His work strikes a chord with many of us because it outlines a future where basically your own or inherited wealth matters and where wage income and apparently your human capital does not matter that much for your income generation. So how do we escape such a one-sided and unequal world? Well, maybe one way is to understand better the interaction between growth, changes in the income distribution, and their implications for shared prosperity.
The following post is a part of a series that discusses 'mind and culture,' the theme of the World Bank’s upcoming World Development Report 2015.
When it comes to development, one size doesn’t fit all. It is about mindsets that can be transformed to see and do things differently. Taking a cue from this, The Hunger Project believes in empowering people to end their own hunger versus providing them with service delivery. The Let’s Talk team caught up with John Coonrod, Executive Vice President, The Hunger Project, to know more about building self-reliant communities.
A new book by Puja Dutta, Rinku Murgai, Martin Ravallion, and Dominique van de Walle looks at how successful India’s 2005 National Rural Employment Guarantee Act has been in creating 100 days of wage employment per year to all rural households whose adult members volunteer to do unskilled manual work in public works projects at a stipulated minimum wage. The bulk of the study focuses on the scheme’s performance in one of India’s poorest states, Bihar. There the scheme seems to be falling well short of its potential impact on poverty. Workers are not getting all the work they want and they are not getting the full wages due. Many report that they had to give up some other income-earning activity when they took up work. The unmet demand for work is the single most important policy-relevant factor in accounting for the gap between actual performance and the scheme’s potential impact on poverty. The book suggests that supply-side constraints must be addressed in addition to raising public awareness, and identifies a number of specific supply-side constraints to work, including poor implementation capacity, weak financial management and monitoring systems.
Last week the President of the World Bank Group launched at the Spring Meetings the report "Prosperity for All." One of the interesting areas the note reported on was the interrelationship between growth, movements in the income distribution and poverty reduction.
There are various ways of showing the impact of growth on people’s income and its interrelationship with a country’s income distribution. In comparing distributions over time, one of the more useful graphs is a Pen’s Parade (figure 1a), named after another Dutch economist as so many inequality or poverty measures are (other examples are the Theil index and Thorbecke for the Foster-Greer-Thorbecke Poverty Measure).
President Jim Yong Kim, Prof Jeff Sachs, Chief Economist Kaushik Basu and Annie Lowrey of the New York Times participated in a panel last Friday titled 'Sharing Prosperity, Delivering Results.'
The four discussed the challenges of achieving the World Bank Group's goals of ending extreme poverty and boosting shared prosperity, and in so doing, all stressed the need to take on the goals with an activist's zeal.
Last week, Oxfam released a powerful report on inequality, “Working for the Many: Public services fight inequality.” The report makes a persuasive case for the need to bring more attention to the issue of inequality in policy discussions. Indeed, at the recent World Economic Forum Annual Meeting, World Bank President Jim Yong Kim stated that “at Davos, income inequality should be front and center” as an important item on the global agenda. I was recently a discussant in a session on the Oxfam report at a Spring Meetings event alongside Max Lawson of Oxfam Great Britain and David Coady of the IMF's Fiscal Affairs Department. The case Oxfam makes that inequality is harmful to the global economy is well articulated and their prescription for a solution is highly focused: increase the amount of progressive taxation to fund free and universal health and education. In the following slides, I provide a few examples of where we might want to broaden our thinking on the issue of inequality. In particular, I offer a couple of illustrations where a singular focus on inequality would lead us to undervalue some very important progress that has been made in the fight to eliminate poverty. In contrast, by ‘twinning’ the goals of eliminating extreme poverty and boosting shared prosperity, the policies we design may be more likely to ensure that everyone shares in growth and prosperity.
This paper reviews the empirical evidence on the existence of poverty traps, understood as self-reinforcing mechanisms through which poor individuals or countries remain poor. Poverty traps, understood as self-reinforcing mechanisms through which poor individuals or countries remain poor, have captured the interest of many development policy makers, because poverty traps provide a theoretically coherent explanation for persistent poverty. They also suggest that temporary policy interventions may have long-term effects on poverty. However, a review of the reduced-form empirical evidence suggests that truly stagnant incomes of the sort predicted by standard models of poverty traps are in fact quite rare. Read the entire paper here.
Good stewardship of land – whether fertile fields or tracts on the edges of growing cities – can drive sustainable and equitable development. Done well, good land governance can enable farmers, community leaders, city planners, remote sensing scientists, researchers and relief organizations to successfully deal with climate change, urbanization, gender equality, and food security. But the complexity of land administration, and its attendant institutional and political hurdles, often hamper progress and reinforce deep-seated inequalities and inertia instead of fostering growth and shared prosperity.
This is what makes the Annual World Bank Conference on Land and Poverty happening this week at the World Bank so important. Over 1,000 experts from 115 countries have gathered here for the event and are exploring a wide range of problems and potential solutions.
As a poverty economist, I know how difficult it is to forecast poverty numbers for even the next year. But, since the World Bank Group (WBG) announced the goal of ending extreme poverty by 2030, I have been projecting poverty numbers of some countries and regions for nearly two decades into the future. I could not help but ask myself “What am I doing this for?”
Forecasting versus Benchmarking
I looked for answers by reading recent papers on similar topics. Most seemed to be competing to prove that their projections were the most plausible. Some seemed better than others, but they were not convincing enough to erase my doubt. Before giving up the search, I reread Ravallion (2012, 2013) , and at last got an answer. In both papers Ravallion projected future poverty under the assumption that the developing world maintains its current pace of growth and poverty reduction. Although his methodology ensures that his projection predicts future poverty accurately if this assumption holds, it is still uncertain whether this assumption will hold and, consequently, whether his projection will prevail.