Working Papers

The COVID-19 pandemic has caused the most universal health and socio-economic crisis in recent history. However, the magnitude of the economic damage has differed widely; some countries were hit particularly hard, while others have managed to weather the storm much better. In this paper, we use cross-country regression analysis to identify factors that help explain the differences in the growth impact of the COVID-19 shock. Our findings underscore the critical role of balancing health and economic concerns in managing the pandemic as both a country’s exposure to the coronavirus and the stringency of containment measures are strongly correlated with its growth performance. In addition,…

In Article 25 (1) of the Universal Declaration of Human Rights, the United Nations recognized in 1948 the basic human right to “security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond ... control.” This paper examines how economic insecurity is related to, yet different from, poverty and inequality, why it matters for human well-being and how it has been changing in different countries around the world in recent years. The paper concludes with discussion of how economic insecurity has been and will be affected by the Covid-19 pandemic/recession.

This paper revisits the earlier assessments of the Palma Proposition and the ‘Palma Ratio’. The former is a proposition that currently changes in income or consumption inequality are (almost) exclusively due to changes in the share of the richest 10 per cent and poorest 40 per cent because the ‘middle’ group between the richest and poorest always capture approximately 50 per cent of gross national income (GNI). The latter is a measure of income or consumption concentration based on the above-mentioned proposition and calculated as the GNI capture of the richest 10 per cent divided by that of the poorest 40 per cent. In this paper we do the following: note the use already being made of…

China has departed from the East Asian model of development by letting inequality to rise to a high level, which is contributing to China’s current problems of macroeconomic imbalance, declining efficiency of capital, and rising social tensions. If inequality persists, China may get caught in the “inequality-trap,” which may then lead it to the “middle income trap (MIT).” Fortunately, China still has the levers to pull to reduce inequality and avoid MIT. Measures along both the “wage route” and the “redistributive route” can be adopted for this purpose. In addition, China may pursue the “cooperative route” to more equitable distribution.

We introduce two separate datasets (The Global Consumption Dataset (GCD) and The Global Income Dataset (GID)) containing an unprecedented portrait of consumption and income of persons over time, within and across countries, around the world. The benchmark version of the dataset presents estimates in PPP units of monthly real consumption and income for every decile of the population (a ‘consumption/income profile’) for 133 countries and more than half a century (1960-2012). We describe the construction of the datasets and demonstrate some possible uses by presenting preliminary results concerning the consumption distribution, poverty and inequality for the world and specific country…

Analyses of redistributive policies often focus on income flows to examine the nexus between redistribution and economic growth. With strengthening signs of growing economic inequality in many countries, an increasing number of economists investigated the existence and nature of a hypothetical trade-off between economic growth and equity. As signs of unsustainable development are strengthening more generally, this paper proposes to look at the broader nexus between redistribution, equity and sustainable development, emphasizing its social and environmental dimensions. It does so by first proposing an analytical framework defining the role of redistributive policies in shaping the private…

This paper argues that SDRs should become a more relevant instrument of international monetary cooperation. This requires transforming them into a pure reserve asset and the IMF into a fully SDR-funded institution. SDRs would then be issued counter-cyclically and treated as deposits of countries in the IMF, which can in turn lend to countries. This approach would correct basic deficiencies of the current global monetary system. Complementary reforms include a substitution account for an orderly and smooth transition from major reserve currencies to SDRs, and the issuance of SDR-denominated bonds as an alternative to other major short-term assets.

This paper assesses the effects of combining fiscal austerity with flexibilization policies aimed at reducing labour costs and increasing competitiveness. Core to our analysis is a global perspective where the aggregation problem is fully taken into account. We derive a stylized macroeconomic framework of distributive and demand dynamics. We show that even in export-led regimes, after considering global feedbacks, flexibilization policies do not lead to higher income and employment. Rather, the end result is contractionary. Over time, the world economy is essentially wage-led and responds positively to coordinated Keynesian stimuli.

Decomposition of real commodity prices suggests four super-cycles during 1865-2009 ranging between 30-40 years with amplitudes 20-40 percent higher or lower than the long-run trend. Non-oil price super-cycles follow world GDP, indicating they are essentially demand-determined; causality runs in the opposite direction for oil prices. The mean of each super-cycle of non-oil commodities is generally lower than for the previous cycle, supporting the Prebisch-Singer hypothesis. Tropical agriculture experienced the strongest and steepest long-term downward trend through the twentieth century, followed by non-tropical agriculture and metals, while real oil prices experienced a long-term upward…