(exclusive vs.) inclusive growth - world...
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Some Facts IG Equity Issues Wealth Reform Laundry List
(Exclusive vs.) Inclusive GrowthBroad Overview
Eduardo Ley
Color and Size of Logo
1. The World Bank logo should be printed in black and whitewhenever possible. For two-color designs, the logo shouldprint in the darker, stronger color available.
2. Although the size of the logo can change, the allocation ofblack and white elements must stay constant:
POSITIVE REVERSE
• black globe grid • white globe grid• round white background • round black background
behind globe behind globe• square black outer box • square white outer box
3. The minimum size for the logo is 2 picas or 1/3 inch (seediagram A), except when used as a final dingbat in WBbrochures or articles for internal use.
Wording
1. The words “THE WORLD BANK” can be placed either tothe right of the logo (centered vertically along the height ofthe logo after 1 em space; see diagram B), or under the logo (the space between the logo and the words “THE WORLDBANK” should be the same as the cap height of the words,aligned flush left; see diagram C). When the logo is placedon a dark or black background, the logo should reverse towhite (see diagram D).
2. The words “THE WORLD BANK” should be set in ALLCAPS, Univers Bold. The size of the type in relation to thelogo should remain constant. Always use the art provided inan electronic file or in CRC.
Placement of Logo
All World Bank books must display the World Bank logo onthe front and back covers, the spine, and the title page.
Front cover
On the front cover, the logo should be placed at either thelower or upper left corner and should be accompanied by thewords “THE WORLD BANK.” Placement of the World Banklogo block on the front cover should be as follows: the outsideedge of the logo (the outer box) should be between 2.25 picas(3/8 inch) and 3.75 picas (5/8 inch) from the trim. The logoshould be placed equidistant from both trim and spine. Seesamples on next page.
The World Bank logo is the only logo to appear on front coversand spines of publications published by EXTOP. Any exceptionto this guideline needs to be approved by the publisher.Additional logos (for cosponsors or copublishers) appear at thebottom of the back cover, along with the World Bank logo.
The World Bank logo asit should appear on awhite background
The World Bank logo asit should appear onblack backgrounds andon two-color designswhen the second coloris dark but not black.
Diagram B
Diagram C
Diagram A, minimum size
Diagram D
The World Bank logo is the official corporate symbol of theWorld Bank and a powerful tool for the public presentation ofthe World Bank’s visual identity. The guidelines for its useaddress placement, proportion, color, and typography. They are intended to ensure that the logo is used consistently andeffectively in all World Bank publications and communications.
Guidelines for the World Bank Logo
September 2011
Some Facts IG Equity Issues Wealth Reform Laundry List
Average GDP per capita Growth 1960–92FLS Dataset (72 countries, 41 drivers) — A First Look at the Data
Histogram of growth
Long−Term Per−Capita Growth
Den
sity
−2 0 2 4 6
0.00
0.05
0.10
0.15
0.20
0.25
Min: −2% • Q1: 0.9% •Median = 2 = Mean • Q3: 3% •Max: 6.6%(0.979)32 = 51%⇒ [× 1
2 ], (1.02)32 = 188%⇒ [×2], (1.066)32 = 773%⇒ [×8]
Some Facts IG Equity Issues Wealth Reform Laundry List
15-Year Average GDP Growth (1990–2005)IMF/WEO—173 countries
−5 0 5 10
0.00
0.05
0.10
0.15
0.20
GDP growth (1990−2005)
(Geometric) Average Growth (173 countries, 15 years)
Den
sity
● ●● ● ●
−5 0 5 10
Min: −6% • Q1: 2.2% •Median = Mean: 3.5% • Q3: 4.7% •Max: 10%(0.98)15 = 70%, (1.035)15 = 168%, (1.05)15 = 207%, (1.07)15 = 276%, (1.1)15 = 418%
Some Facts IG Equity Issues Wealth Reform Laundry List
Sub-Saharan Africa
0
5
10
15
20
25
2004 06 08 10 12-10
-5
0
5
10
15
2004 06 08 10 12-15
-10
-5
0
5
10
15
-10 -5 0 5 10 15 20-10
-5
0
5
10
15
20 Contributions to Output Growth(percent)
Output Growth(percent)
Private consumptionPublic consumptionInvestmentNet exportsDiscrepancy
GDP growth
2
Recovery is well under way, with growth in many economies back to the highs of the early 2000s. Strong domestic demand, closing output gaps, and rising inflation call for normalization of the fiscal stance. Building policy room is key to containing risks emanating from a further deterioration in the global outlook.
Figure 2.14. Sub-Saharan Africa: Continued Strength1
Compound annual rate of change, 2004–08
Proj
ecte
d gr
owth
, 201
1
Oilexporters
Low-incomecountries
(LICs)
Middle-incomecountries (MICs)
2004 06 08 10 12-60
-30
0
30
60
90
120
150
180
SSA
LICs
Oil exporters
MICs
Sources: Haver Analytics; and IMF staff estimates. Aggregates for the external economy are sums of individual country data. Aggregates for all others are computed on the basis of purchasing-power-parity weights. Excludes Liberia and Zimbabwe due to data limitations. Due to data limitations, the following countries are excluded: Chad, Republic of Congo, and Equatorial Guinea from oil exporters; Burundi, Cameroon, Central African Republic, Comoros, Democratic Republic of Congo, Eritrea, Guinea, Guinea-Bissau, Liberia, Malawi, São Tomé and Príncipe, Togo, Zambia, and Zimbabwe from LICs.
1
2
LICs
MICs
Oil exporters
SSA
2004 06 08 10 12-10-8-6-4-202468
10
RemittancesPublic aidPrivate direct investmentPrivate portfolio flows
Current Account(percent of regional GDP)
Net Financial Flows(billions of U.S. dollars)
LICsMICs
Oil exportersSSA
2007 09 11
3
Fiscal Net Lending/Borrowing(percent of GDP)
Inflation(year-over-year percent change)
3 Covered in a different map
Below –2Between –2 and 0Between 0 and 2Above 2
Insufficient data
Figure 2.13. Sub-Saharan Africa: Current Growth versus Precrisis Average(Percentage point difference in compound annual rates of change between 2011–12 and 2000–07)
Source: IMF staff estimates.Note: Due to data limitations, data for Liberia and Zimbabwe are the growth differentials between the average in 2011–12 and 2001–07.
Some Facts IG Equity Issues Wealth Reform Laundry List
Household Income DistributionStatic Snapshot
% share of household incomeKenya (2000–09)
lowest 40% −→ 13%highest 20% −→ 50%
US (1967)lowest 40% −→ 15%highest 20% −→ 44%
US (2001)lowest 40% −→ 12%highest 20% −→ 50%
SAZ (2008)lowest 40% −→ 5%highest 20% −→ 75%highest 10% −→ 50%
Static snapshot—what about mobility?
Some Facts IG Equity Issues Wealth Reform Laundry List
South Africa—three snapshotsTop 30% of households accrue 75% of income!
Cumulative shares of incomeDecile 1993 2000 2008
1 0.3 0.4 0.42 1.3 1.5 1.43 3.0 3.1 2.94 5.2 5.2 5.05 8.3 8.2 7.86 12.7 12.1 11.47 18.8 17.7 16.88 28.4 26.5 25.49 46.1 43.3 42.0
10 100.0 100.0 100.0Source: OECD SEM WP 101
Some Facts IG Equity Issues Wealth Reform Laundry List
Hunting the Rich
Percent of TaxesPaid by top 10%France 28%Germany 31%UK 39%Italy 42%US 45%
Some Facts IG Equity Issues Wealth Reform Laundry List
What does ‘inclusive’ mean?
IG entails responsible and sustainable creation as well asjust distribution of both wealth and welfare.Extending access to (especially employment) opportunitiesmore widely.Two mutually reinforcing strategic pillars:
Sustainable and sustained growth to unleash economicopportunities.The diffusion of opportunities, by way of investment ineducation, health and infrastructure.
Issues: Time frame, static vs dynamic (mobility),income-support vs wealth-building agendas
Some Facts IG Equity Issues Wealth Reform Laundry List
Investing in a Green and Inclusive EconomyUnited Nations Environment Management Group
“Although social inclusiveness is one of the keycharacteristics of a green economy, the term ‘greeneconomy’ may often be interpreted as referring only toenvironmental sustainability, which does not necessarily orautomatically lead to more inclusiveness. In this report,therefore, the term ‘a green and inclusive economy’ (GIE)is adopted.”“At the operational level, a GIE is where the growth ofincome and productive employment, and access to basicservices as well as the reduction of poverty, inequity andrisk exposure is promoted by targeted investments thatwill bring social and environmental benefits to all in anintegrated manner.”
Some Facts IG Equity Issues Wealth Reform Laundry List
Shared GrowthFramework
∆Capital +3 ∆Output = ∆(PQ)
))RRRRRRRRRRRRRR ∆Ξks
∆Labor Productivity
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Some Facts IG Equity Issues Wealth Reform Laundry List
Is there a trade-off between growth and equity?E Duflo (2011) “Balancing growth with equity: The view from Development”
A recurring issue in development circles is whether countriesshould focus their development strategies on growth or onpoverty reduction strategies.
Sources for a trade-off between growth and equity1 possible influence of growth on the distribution of wealth2 possible influence of the distribution of wealth on growth
(presumably through an investment channel)3 some policies that favor growth could have an increase in
inequality as a direct by-product; or that policies that favorequity could have a decrease in growth as a directby-product
Some Facts IG Equity Issues Wealth Reform Laundry List
The role of policy in Kakotopiadysfunctional society, far away from perfect markets
Fact: markets function poorly in poor countriesThe scope for inequality to affect growth, and for growth toaffect inequality, widens in Kakotopia.When growth catches on, it is more likely to benefit abroad segment of society, and more likely to be politicallysustained in the long run if the poor are not shut out of theprocess by poor health and education, lack of access tocredit and savings, and other consequences of combinedinequality and imperfect markets.Policies that correct the most salient shortcomings in theefficiency of factor markets, and in particular thedifferences in access (to credit, savings instruments,insurance, etc.) among rich and poor, can in principleenhance both equity and efficiency
Some Facts IG Equity Issues Wealth Reform Laundry List
Key Markets that may be less than perfect
1 Market for Credit2 Market for Savings3 Market for Insurance4 Market for Land5 Market for Human Capital
Empirical evidence on effects and direction of effects is mixed.
Which policies may balance growth with equity?
Policies that ensure that the poor would benefit from anincrease in growth, whatever its source.
Some Facts IG Equity Issues Wealth Reform Laundry List
Financial ServicesSavings, Credit and Insurance
Administered social lending: widespread defaultMicrofinance
Does help people live a bit better but not a ticket out ofpovertyAverage profit of business of the poor: quite lowSMEs? Maybe (Korean industrial policy).
Insurance—subsidies for weather and catastrophic healthinsurance?
Some Facts IG Equity Issues Wealth Reform Laundry List
Human Capital
A reform of the education system thus seems like it would be atop priority for a country focused on growth and equity.
The children of the poor go to bad schools, which teachthem very little for few years before they drop out; thechildren of the rich all attend private schoolsreproduces the existing social structure, teaches very littleto the poor, and does not do a good job of identifying thosewho are talentedas far as primary education is concerned, there is nowconsiderable evidence on how to improve the quality ofprimary education—teachers are sensitive to incentivesMuch less is known about how to deliver qualitysecondary education at an affordable cost, and what typeof benefits this would bring to individuals or the country
Some Facts IG Equity Issues Wealth Reform Laundry List
Mining and Sustainability — ZMB 2009Extractive Industries and Foreign Entities in African Economies
Percent of GDPDividend Outflows 16.0Donor Grants 3.7Mining Tax Revenue (incl. royalties) 1.4NR depletion 20.0
... but GDP is growing — All is Well
... add to Resource-Curse Sin List: GDP Complacency
⇒ GDP accounting leads to poor decision-making
Some Facts IG Equity Issues Wealth Reform Laundry List
Health and IncomeUnder-performers in HD indicators are Resource-Rich Countries
100 50 000500 1 000 5 000 10 000 30 00020 0003 0002 000
300
5
10
50
100
200
70
30
20
7
3
4
200 300
Population (millions)
1 000
100
10
<1
1
2006 data for countries & territories from UN Statistics Division, Institute for Health Metrics and Evaluation and others sources as stated in:"Gapminder documentation 2007:1" at: www.gapminder.org/publications.
Free to copy for non-commercial useE-mail: [email protected]
www.gapminder.org
Regions
Sub-Saharan Africa
Arab states
Europe & Central Asia
Americas
Asia & Pacific
BY: $
Gapm
inder World Chart 2006 - Ver. January 2008
Gapminder World Chart 2006
RichPoor
Sick
Healthy
Antigua & Barbuda
Dominica
Faeroe Is.
Greenland
Kiribati
Marshall Is.
Monaco
N.Mariana Is.
Palau
San Marino
Seychelles
St. Kitts & Nevis
Tonga
American Samoa
Anguilla
Montserrat
Turks & Caicos Island
Tuvalu
Nauru
Andorra
Bermuda
Cayman Is.
Isle of Man
Liechtenstein
British VirginIslands
Jersey
Aruba
Bahamas
Bahrain
Barbados
Belize
Bhutan
Brunei
Cape Verde
Comoros
Cyprus
Djibouti
Equatorial Guinea
Fiji
Fr. Polynesia
Grenada
Guam
Guyana
Iceland
Luxembourg
Macao
Maldives
Malta
Mayotte
Micronesia
Netherlands Ant.
New Caledonia
Qatar
Sao Tome & Principe
Solomon Islands
St. Lucia
St. Vincent & Grenadines
Suriname
Vanuatu
Virgin Islands(U.S.)
Samoa
Sierra Leone
Albania
Armenia
Austria
Azerbaijan
Belarus
Benin
Bolivia
Bosnia & Herzegovina
Botswana
Bulgaria
Burundi
Central African Rep.
Congo, Rep. (Brazzaville)
Costa Rica
Croatia
Denmark
Dominican Rep.
El Salvador
Eritrea
Estonia
Finland
Gabon
Gambia
Georgia
Guinea
Guinea Bissau
Haiti
Honduras
Hong Kong
IrelandIsrael
Jamaica
Jordan
Kuwait
Kyrgyz Rep.
Laos
Latvia
Lebanon
Lesotho
Liberia
Libya
LithuaniaMacedonia
Mauritania
Mauritius
Moldova
Mongolia
Namibia
New Zealand
Nicaragua
NorwayOman
Panama
Papua New Guinea
Paraguay
Puerto Rico
Rwanda
Singapore
Slovak Rep.
Slovenia
Somalia
Swaziland
Sweden
Switzerland
Tajikistan
Timor LesteTogo
Trinidad &Tobago
Turkmenistan
United Arab Emirates
Uruguay
West Bank& Gaza
Serbia &Montenegro
Afghanistan Angola
Burkina Faso
Cambodia
Cameroon
Chad
Colombia
Côte d'Ivoire
Ecuador
Ghana
Guatemala
Iraq
Kenya
North Korea
Madagascar
Malawi
Mali
Morocco
Mozambique
Myanmar
Nepal
Niger
Peru
Senegal
Sri Lanka
Syria
Tanzania
Tunisia
Uganda
Ukraine
Uzbekistan
Yemen
Zambia
Zimbabwe
Sudan
Algeria
Argentina
ChileCuba
CzechRepublic
Hungary
Kazakhstan
Malaysia
Poland
Portugal
Romania
Saudi Arabia
South Africa
Venezuela
Taiwan
AustraliaBelgium Canada
Greece
Italy
South Korea
Netherland
Spain
Congo DR(Kinshasa)
Egypt
Ethiopia
France
Germany
Iran
Philippines
Thailand
Turkey
UK
Vietnam
Brazil
Bangladesh
Indonesia
Japan
Mexico
Nigeria
Pakistan
Russia
USA
China
India
Money Gross National Income per capita - in US dollar by exchange rate (log)
He
alth
Chi
ldre
n d
ying
be
fore
ag
e 5
pe
r 100
0 liv
e b
irths
(lo
g)
Low income countries Middle income countries High income countries
Some Facts IG Equity Issues Wealth Reform Laundry List
Growth of What?Stiglitz-Sen-Fitoussi Report on the Measurement of Economic Performance and Social Progress
Mismeasuring our Lives:GDP is not wrong as such but wrongly used
What we measure affects what we do; and if ourmeasurements are flawed, our decisions may be distorted.
(Technical issues — quality change, govt intermediateinputs (remedial/defensive expenditures) / G in GDP)Income vs ProductionNet vs Gross —especially DepletionExternalities and Non-market activities —missing in GDP
We will not change our behavior unless we change theways we measure economic performance.Growing Poorer — aNNI vs GDP
Some Facts IG Equity Issues Wealth Reform Laundry List
GDP accounting leads to poor decision-makingGrowth in GDP vs Growth in aNNI: Cross-Country Data: 1990–2008
may need to be revisited because it may be largely unjusti-fied under current policies.
From GDP to National Wealth
The key to increasing future consumption and thus the stan-dard of living lies in increasing national wealth, including notonly the traditional measures of capital (such as producedand human capital), but also natural capital. Natural capital,in turn, comprises assets such as land, forests, and subsoil re-
sources. All three types of capital—produced, human, andnatural—are key inputs to sustaining economic growth.
However, as the Stiglitz quote on the first page of thisnote points out, GDP does not account for the depreciationof assets. Drawing down assets (of any kind) implies dissav-
2 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise
a. By income level
real GDP
growth
20
10
0
–10
–20
–20
–10 0 10 20
real aNNI growth
low-income countries
high-income OECD countries
high-income non–OECD countries
lower-middle-income countries
upper-middle-income countries
b. By geographic region
real GDP
growth
20
10
0
–10
–20
–20
–10 0 10 20
real aNNI growth
East Asia and the Pacific
Europe and Central Asia
Latin America and the Caribbean
Middle East and North Africa
South Africa
Sub-Saharan AfricaSource: World Bank 2010.Note: OECD = Organisation for Economic Co-operation and Development.
Figure 1. Rates of Growth of Real GDP versus Real aNNI, 1990–2008
Figure 2. Growth Rates of GDP and aNNI in Sub-Saharan Africa,1991–2008
Source: World Bank 2010.
percent
8
6
4
2
0
–2
–4
–6
1991
1993
1995
1997
1999
2001
2003
2005
2007
year
real GDP growth real aNNI growth
Figure 3. Consumption, GDP, and aNNI in Sub-Saharan Africa, 1990–2008Constant 2000 US$
Source: World Bank 2010.
millions of U
S$
12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
1990199219941996199820002002200420062008
year
GDPfinal consumption expenditureadjusted net national income (aNNI)
may need to be revisited because it may be largely unjusti-fied under current policies.
From GDP to National Wealth
The key to increasing future consumption and thus the stan-dard of living lies in increasing national wealth, including notonly the traditional measures of capital (such as producedand human capital), but also natural capital. Natural capital,in turn, comprises assets such as land, forests, and subsoil re-
sources. All three types of capital—produced, human, andnatural—are key inputs to sustaining economic growth.
However, as the Stiglitz quote on the first page of thisnote points out, GDP does not account for the depreciationof assets. Drawing down assets (of any kind) implies dissav-
2 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise
a. By income level
real GDP
growth
20
10
0
–10
–20
–20
–10 0 10 20
real aNNI growth
low-income countries
high-income OECD countries
high-income non–OECD countries
lower-middle-income countries
upper-middle-income countries
b. By geographic region
real GDP
growth
20
10
0
–10
–20
–20
–10 0 10 20
real aNNI growth
East Asia and the Pacific
Europe and Central Asia
Latin America and the Caribbean
Middle East and North Africa
South Africa
Sub-Saharan AfricaSource: World Bank 2010.Note: OECD = Organisation for Economic Co-operation and Development.
Figure 1. Rates of Growth of Real GDP versus Real aNNI, 1990–2008
Figure 2. Growth Rates of GDP and aNNI in Sub-Saharan Africa,1991–2008
Source: World Bank 2010.
percent
8
6
4
2
0
–2
–4
–6
1991
1993
1995
1997
1999
2001
2003
2005
2007
year
real GDP growth real aNNI growth
Figure 3. Consumption, GDP, and aNNI in Sub-Saharan Africa, 1990–2008Constant 2000 US$
Source: World Bank 2010.
millions of U
S$
12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
1990199219941996199820002002200420062008
year
GDPfinal consumption expenditureadjusted net national income (aNNI)
aNNI = GNI − capital depreciation − energy depletion −mineral depletion − net forest depletion
K Hamilton & E Ley (2010) “Measuring National Income and Growth in Resource-Rich, Income-Poor Countries”
Some Facts IG Equity Issues Wealth Reform Laundry List
From GDP to NNIExtractive Industries and Foreign Entities in African Economies
Aggregate Supply (Q total output minus R intermediate inputs)must equal Aggregate Demand (Domestic and External):
(Q − R) + M = C + I + XGDP ≡ (Q − R) = C + I + (X −M)︸ ︷︷ ︸
Trade Balance
GNI ≡ GDP + Yf + Yr
= C + I + (X −M) + Yf + Yr︸ ︷︷ ︸Current Account Balance
aNNI ≡ GNI − (δK + nsR)aNS ≡ aNNI − (C − E)
aNS ≡ adjusted (or genuine) national savings.
Some Facts IG Equity Issues Wealth Reform Laundry List
Sustainable Development
Intergenerational well-being:
Vt =
∫∞
t[U(Cs)e−δ(s−t)]ds (1)
Since Ct = F(Kt) − It, we have Vt = V(Kt).Kt includes different types of capital:
physicalnaturalintangible: knowledge, human, and social capital
National Wealth:Wt =
∑i
pitKit (2)
Some Facts IG Equity Issues Wealth Reform Laundry List
Genuine InvestmentSource of increasing/maintaining Wealth
Increasing well-being:
∆Vt =∑
j
pjt∆Kjt︸ ︷︷ ︸exogenous
+∑
i
pit∆Kit (3)
Sustainable development: Vt+1 ≥ Vt for all tpit’s are shadow prices reflecting social valuespit∆Kit ≡ Iit is capital i’s genuine investmentGenuine investment is the driver of sustainabledevelopment
Some Facts IG Equity Issues Wealth Reform Laundry List
Where’s the Wealth of Nations?Wealth is the source of sustainable Consumption
Wealth Shares by Type of Asset and Income Group (2005)Capital
Produced Natural IntangibleLow Income 13 30 57Lower Middle-Income 24 25 51Upper Middle-Income 16 15 69High Income OECD 17 2 81World 18 5 77
Source: The Changing Wealth of Nations, WB (2010)
Key for Sustainable Well-Being
Increase/maintain per-capita National WealthGenuine Investment—transforms resources into Wealth
Some Facts IG Equity Issues Wealth Reform Laundry List
Rapid, Equitable Growth — Virtuous CircleRole of Government
Achieving Inclusive Growth — Asset Agenda1 Induce the poor to invest in the assets that they
control—typically land and human capital2 Increasing the rates of return to human capital and other
assets leads to1 increased work effort2 higher savings3 higher investment4 future: higher productivity, lower inequality
3 An important factor in the East Asia Miracle
(Nancy Birdsall and others (2000) “Natural Resources, Human Capital and Growth”)
Some Facts IG Equity Issues Wealth Reform Laundry List
Genuine Savings as percent of GNI: 1980–2007Divergence—Big Time
-‐10
-‐5
0
5
10
15
20
25
30
35
1980 1985 1990 1995 2000 2005
Percen
tage of G
NI
Genuine Saving: 1980-‐2007
Sub-‐Saharan Africa
La6n America & Caribbean
East Asia & Pacific
Source: Ley and Hamilton (2010)
Adjusted Net National Income = GNI - capital depreciation - energy depletion - mineral depletion - net forest depletion
Adjusted National Savings = aNNI - consumption + education expenditures
Some Facts IG Equity Issues Wealth Reform Laundry List
Political Economy of Reform
Development Multilaterals, IFIs
What do we do?Support of Current PoliciesSmall ∆s: ProjectsLarge ∆s: Reforms
ElementsAnalytics / KnowledgePolitical Economy of Reform
Understand why things are the way they areEngage partners/reformers with political capital
Some Facts IG Equity Issues Wealth Reform Laundry List
Political Economy of Reform
Creative & cooperative elements of entrepreneurship
“This one-sided picture and the traditional emphasis onthe creative aspect of entrepreneurship, combined perhapswith an apologetic feeling about the cooperativecomponent, have prevented us from noticing theimportance of the latter and its lack in manyunderdeveloped countries.“This lack can now be understood as a direct consequenceof a strongly ego-focused conception of progress and theconsequent diffusion of tension and hostility between thepeople.”
—A.O. Hirschman (1958) The Strategy of Development
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Political Economy of Reform
Group-focused vs Ego-focused ChangeAny project/reform that passes the CBA test increases WPolicymakers care not only about W (country’s portfolio ofcapital assets) but also about their own political capital:Kpol(W, ·)Their own objective function: αW + (1 − α)Kpol(W, ·)HRV: The set of policies that is likely to provide the biggestbang for the reform buck to make best use of scarcepolitical capital
Some Facts IG Equity Issues Wealth Reform Laundry List
Shared GrowthSchematics
∆Capital +3 ∆Output
((RRRRRRRRRRRRRR ∆Ξks
∆Labor Productivity
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Some Facts IG Equity Issues Wealth Reform Laundry List
Qs Laundry List
1 What was the past growth performance?analysis of trends: per capita GDPstandard tablesinvestment over time
2 What are the aggregate-demand sources of growth?decompose the rate of growth of GDP in the part explainedby domestic demand and by net exports,break up the contribution of each component of demand:consumption, investment, government spending, exportsand imports
3 What are the sectoral sources of growth?decompose the rate of growth by sector of origin(agriculture, manufacturing industry, services etc.)
Some Facts IG Equity Issues Wealth Reform Laundry List
Qs Laundry List
4 What was the role of TFP vs factor accumulation?growth accounting
5 What has been the path of investment and wealth?estimation of capital stock and capital/income ratios.
if there is no capital accumulation something is happening.same logic can be applied to migration of labor and of highlyskilled people
Is economic growth sustainable?national wealth, depletion
Some Facts IG Equity Issues Wealth Reform Laundry List
Qs Laundry List
7 What has been the return on human and physical capital?analysis of RORK with as much disaggregation as possible.
rork multiplies the change in the capital stock, you can havehigh investment share but low productivity in theinvestment projects;labor: what is happening to the wage premium?
8 What are the population trends?Population trendsDemographic structureLabor force participationEducation attainmentRate of return on education
Some Facts IG Equity Issues Wealth Reform Laundry List
Qs Laundry List
9 What has been the productivity performance?ICAsWhat percentage of industries account for TFP gains in theperiod?What characterizes the firms and industries experiencingnegative TFP growth?What is the state of technology adoption?
10 What are obstacles to the expansion of exports?product space
Some Facts IG Equity Issues Wealth Reform Laundry List
Qs Laundry List
11 What is the macro environment?inflation, interest rates, BOP, credit to private sector,exchange rate
12 What is the role of government?Composition of government spendingRegulationWhat are the promising reforms?
Ay, caramba!