Dabla-Norris et al.’s “Causes and Consequences of Income Inequality: A Global Perspective” is the third IMF Staff paper series on inequality. It focuses on how income distribution affects growth. Its main finding is that “if the income share of the top 20% increases by 1 percentage point, GDP growth is 0.08 percentage point lower in the following years, suggesting that the benefits do not trickle down. Instead, a similar increase in the income share of the bottom 20% is associated with 0.38 percentage point higher growth”. The paper sums up what we know about inequality of outcomes and opportunities, and their drivers. It is full of quotes coming in handy for advocacy such as “healthier societies, as proxied by lower female mortality rate, tend to have lower income inequality” and “better access to education […], improved health outcomes, and redistributive social policies help raise the income share of the poor and the middle class irrespective of the level of economic development of a country”.
Hoekman’s “Trade and Growth: The end of an era?” shows that while the trade/GDP ratio has changed over the past 6 decades, it may now have structurally stopped rising. It discusses 3 structural factors possibly causing this slowdown: the end of the integration of China and Eastern Europe; global value chains (i.e., big businesses outsourcing part of their production process to firms in other countries) expansion reaching its limits; and protectionism. And it says that technology (sigh) and the liberalization of trade in services could give a boost to global trade in the nearer future.
My graph of the week is from Warren’s “What will the next generation of development professionals look like?” presenting the results of a survey with 1000+ development professionals about what will be needed to service our industry in the next 10 years. Integrators (those who understand different specialties, how they impact each other and foster cross-specialty partnerships) will be in high demand; more professionals will come from high tech firms and social impact investors; and human-centered design will be a required skill. Are we ready?
My quote of the week is from Gapminder’s Rosling at UNICEF: “You should never give aid money to a country that can buy a Swedish car company; there, guiding domestic money is what is needed”.