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Does More Income Mobility = Higher Social Welfare?

William Maloney's picture
 Curt Carnemark / World BankIncome mobility is usually considered a good thing. It implies higher social welfare as the ability of individuals to move up and down the income ladder mitigates the impacts of poor income distribution. But it is also true that when income jumps up and down unexpectedly, life becomes riskier and planning, difficult. This is why making a general link between the mobility we observe in the data and welfare is not straightforward.

A common approach used to show high mobility is a low correlation of present and past incomes is captured, for instance, by the Hart index (cov lnyt, lnyt-1). If we assume, as is often done, that an individual’s income is comprised of a transitory component (short-term blips up or down in a self-employed person’s income that we can smooth, or even measurement error), and a permanent component where each income shock is persistent (say, an income loss after an involuntary job change (an AR (1) process with autoregressive coefficient, ρ), then the Hart index can be broken into three parts.

Evening It Up: A New Oxfam Report on Inequality

Dean Mitchell Jolliffe's picture

In Even it Up: Time to End Extreme Inequality, Oxfam has delivered another powerful report making the case that tackling inequality is essential to create a more just world and to eliminate extreme poverty. I was asked to comment on this newly released report at an October 31 event held at the IMF, and was as impressed by the presentation as I was with the report.

Oxfam effectively uses research findings to advocate for policy changes to reduce global inequality. This statistics-laden report also wisely features compelling stories about real people, helping the reader to better understand how vast disparities in wealth adversely affect wellbeing. Oxfam has consistently argued to bring inequality to the fore of policy discussions, and not surprisingly, this report appears to have created a groundswell for their global #Even It Up campaign. While there were instances where I found myself questioning the quality of some references supporting a few statements and estimates, my overall reaction was that the ‘big picture’ claims of the report were well substantiated. In my comments, I suggest that if this report is a call to action, a useful next step for Oxfam or a partner in this work, will be to bring more clarity to what it means to eliminate extreme inequality. Establishing a goal or a measure to monitor progress will help to create better policies, and ensure better collaboration across governments and institutions.

Issues with Power Supply, Access to Finance, and Corruption are hindering firms in DRC

Silvia Muzi's picture

The goal of the Enterprise Surveys (ES) is to portray the quality of the business environment in the economy by asking a set of questions that capture both the experiences and perceptions of firms. Little is known about what businesses experience in emerging and developing economies and the Enterprise Surveys intend to some extent alleviate this knowledge gap. Below we provide highlights of the recently released data for the Democratic Republic of Congo

Friday Roundup: Ebola, Malaria and Cellphones, Jean Tirole, Report on the Data Revolution, and Deworming

LTD Editors's picture

The World Health Organization (WHO) said today that it was sending more experts to help Mali fight Ebola, a day after the first case of the disease was confirmed there.  Read more.

Martin Edlund, CEO of Malaria No More, writes in about the big role cell phones can play in eliminating malaria, refering to it as a 'Swiss Army knife' for the disease.

A Bitter Side to Andhra Pradesh's Ex-Post Sugarcane Permit System

Richard J. Sexton's picture

India is the World’s second largest producer of sugarcane (after Brazil). Approximately 45 million Indian farmers are involved in cane production, and cane processing is the second largest agro-processing sector in the Country. In her dissertation research on this industry (supervised by Goodhue and Sexton) Sandhya Patlolla encountered an unusual marketing practice that is unique to the Andhra Pradesh (AP) State. Private sugar processors issue ‘permits’ to selected cane growers a few weeks before harvest. These permits allow growers to deliver a specified amount of cane during a specified period of time. Farmers without a permit must sell their cane at a reduced price for manufacture into gur, a traditional Indian sweetener. The price difference averaged 43% over the six years of data acquired for our study. We wondered why sugar processors in AP would create uncertainty among farmers by using ex post permits instead of offering ex ante production contracts?

Do Nepali businesses have more female managers compared to other countries?

Arvind Jain's picture

One of the primary goals of the Enterprise Surveys is to provide high quality data about the business environment based on establishments’ actual day-to-day experiences. This provides much needed information given how little is known about what businesses experience in developing economies. To raise awareness of the recently released Nepal 2013 Enterprise Survey, we provide a few highlights below. 
The Nepal 2013 Enterprise Survey consists of face-to-face interviews with 482 firms across the Central, Western, and Eastern regions in Nepal. Fieldwork was conducted between February and June 2013, with survey questions referencing the 2013 fiscal year. This post will focus on a couple of highlights. For the full survey highlights please see the Nepal 2013 Country Highlights document.

Friday Roundup: Agricultural Productivity & Poverty Reduction in Bangladesh, International Day for the Eradication of Poverty, A conversation with Yang Lan on Ending Extreme Poverty, Measuring Poverty, and Universal Health

LTD Editors's picture

A new working paper by Shahe Emran and Forhad Shilpi looks at the impact of increased agricultural productivity (e.g. through increased rainfall) on hired labor, wages and poverty. The paper finds a positive response of labor hours devoted to market activities as opposed to home production. Evidence also indicates that a positive rainfall shock increases per capita consumption significantly, thus implying that agricultural productivity increase played an important role in poverty reduction achieved in the last two decades in rural Bangladesh.

Today is the International Day for the Eradication of Poverty, and the theme for this year is 'Leave no one behind: think, decide and act together against extreme poverty.' Learn more, and follow on Twitter #endpoverty.

What are the top obstacles for Bangladeshi businesses?

Arvind Jain's picture

One of the primary goals of the Enterprise Surveys is to provide high quality data about the business environment based on establishments’ actual day-to-day experiences. This provides much needed information given how little is known about what businesses experience in developing economies. To raise awareness of the recently released Bangladesh 2013 Enterprise Survey, we provide a few highlights of the surveys below. 

Poverty measurement and PPPs: The World Bank explains

LTD Editors's picture

As the editors of Let's Talk Development, we want to respond to questions raised recently in social media channels about use of 2011 International Comparison Program (ICP) as well as during events and discussions about poverty and measurements during the Annual Meetings of the World Bank and IMF last week.

The World Bank currently uses an international poverty line of $1.25 (per person per day) in 2005 prices to monitor global poverty. The process draws on several data sources, including the ICP. The most recent  global and regional poverty estimates cover the period 1981-2011 and are available from the recently updated Povcalnet database; they are based on data from well over 1,000 household surveys, covering nearly all developing countries. The latest estimates have been published and  explained in both the recent Policy Research Report and the Global Monitoring Report, published last week.