remittances and the informal economy abstract many developing countries are characterized by a large informal sector and are also often heavily dependent on remittance inflows from abroad we develop a general equilibrium framework to understand better the dynamic absorption of remittances in a two sector small open economy by incorporating many of the stylized features of the informal sector calibrating the model to yield a long run equilibrium consistent with sample averages for 56 developing countries for the period 1990 2014 we show that the effect of remittances depends critically on how they impinge on the recipient economy i e whether these inflows are i permanent or temporary ii associated with a collateral effect to securitize borrowing and iii exogenous or countercyclical we also identify the conditions under which remittances are associated with an expansion of the informal sector as well as the dutch disease effect

efficient mechanisms for bilateral trading we consider bargaining problems between one buyer and one seller for a single object the seller s valuation and the buyer s valuation for the object are assumed to be independent random variables and each individual s valuation is unknown to the other we characterize the set of allocation mechanisms that are bayesian incentive compatible and individually rational and show the general impossibility of ex post efficient mechanisms without outside subsidies for a wide class of problems we show how to compute mechanisms that maximize expected total gains from trade and mechanisms that can maximize a broker s expected profit journal of economic literature classification number 026

changes over time in multidimensional poverty methodology and results for 34 countries summary this paper sets out a systemic account of intertemporal changes in multidimensional poverty using the alkire foster adjusted headcount ratio and its consistent sub indices it uses three techniques to assess the pro poorness of multidimensional poverty reduction the analysis of changes in multidimensional poverty draws on the global multidimensional poverty index mpi and related destitution measure in 34 countries and 338 sub national regions covering 2 5 billion people for which there is a recent mpi estimation and comparable demographic and health survey dhs dataset across time first it assesses overall changes in poverty and its incidence and intensity and compares this with changes in 1 90 poverty next utilizing the property of subgroup decomposability it examines changes in the mpi and its consistent sub indices over time across urban rural regions sub national regions and ethnic groups the decomposition analysis identifies relevant national patterns including those in which the pace of poverty reduction is higher for the poorest subgroups finally the paper analyzes the dynamics of a strict subset of the poor who are identified as destitute using a more extreme deprivation cutoff vector and studies relative rates of reduction of destitution and poverty by country and region this extensive empirical analysis illustrates how to assess the extent and patterns of reduction of multidimensional poverty as well as whether it is inclusive or whether some people or groups are left behind naturally some further research questions emerge

the effects of welfare and tax reform the material well being of single mothers in the 1980s and 1990s abstract the tax and welfare programs that provide income and in kind benefits to single mothers have changed dramatically in recent years these changes began as far back as the mid 1980s and culminated with the 1996 welfare law that ended welfare as we knew it these tax and welfare changes have sharply increased the employment of single mothers and cut welfare rolls however little is know about the effects of these policy changes on the material well being of single mothers and their children studies of those leaving welfare have found that a substantial percentage have problems paying rent purchasing enough food and paying utility bills other studies found a decline in income among the worst off single mothers after 1994 or 1995 the goal of this paper is to examine the material well being of single mothers and their families before and after recent welfare and tax reforms using data from two nationally representative household surveys we examine the consumption patterns of single mothers and their families from 1984 2000 we find that the material conditions of single mothers did not decline in recent years either in absolute terms or relative to single childless women or married mothers this pattern holds for the average single mother as well as for low educated single mothers at both the 15th and 25th percentiles of the consumption distribution in most cases our evidence suggests that the material conditions of single mothers have improved slightly

a utilitarian approach to the provision and pricing of excludable public goods the paper studies utilitarian welfare maximization in a model with an excludable public good where individual preferences are private information if inequality aversion is large optimal allocations involve the use of admission fees and exclusion to redistribute resources from people who benefit a lot from the public good to people who benefit little if inequality aversion is close to zero optimal admission fees are zero these results are robust if earning abilities provide an additional source of heterogeneity and income taxation an additional policy instrument

dodging the grabbing hand the determinants of unofficial activity in 69 countries across 69 countries higher tax rates are associated with less unofficial activity as a percent of gdp but corruption is associated with more unofficial activity entrepreneurs go underground not to avoid official taxes but to reduce the burden of bureaucracy and corruption dodging the grabbing hand in this way reduces tax revenues as a percent of both official and total gdp as a result corrupt governments become small governments and only relatively uncorrupt governments can sustain high tax rates 2000 elsevier science s a all rights reserved

economic globalization and women s employment the case of manufacturing in mexico sociological research has been generally critical of the effects of economic globalization on developing countries however greater worldwide economic integration may have created new employment o

poverty comparisons over time and across countries in africa abstract we use demographic and health surveys dhs to compare poverty at two or more points in time within and between african countries our welfare measure is an index resulting from a factor analysis of various household characteristics durables and household heads education an advantage of this measure is that for intertemporal and intraregional comparisons we need not rely on suspect price deflators and currency conversion factors the wide availability and similarity of questionnaires of the dhs facilitate comparisons over both time and countries our results generally show declines in poverty during the previous decade largely due to improvements in rural areas

chronic poverty in the united states this paper proposes a method of measuring chronic and transitory poverty using an axiomatically sound additively decomposable index of aggregate poverty our approach is contrasted with alternative methods of measuring poverty persistence we use our method to measure chronic and transitory poverty in the united states during the 1980s and late 1970s and find that chronic poverty is a more serious problem than previously thought between the late 1970s and mid 1980s poverty not only increased it became more chronic and less transitory in nature this is true for the population as a whole and for some but not all of the subpopulations we considered the latter were defined according to race type of social unit and educational qualifications of the head of the social unit all empirical analyses are based on data from the panel study of income dynamics

money laundering as a crime in the financial sector a new approach to quantitative assessment with an application to italy this study provides an answer to the question of how much cash deposited via a financial institution can be traced back to criminal activities by developing a new approach to measure money laundering and proposing an application to italy we define a model of cash in flows on current accounts considering besides dirty money to be laundered also the legal motivations to deposit cash and the role of the shadow economy we find that the average amount of cash laundered in italy is around 6 of gdp these findings are coherent with estimates of the nonobserved economy obtained in previous studies

revisiting the classical view of benefit based taxation this paper explores how the persistently popular classical logic of bene t based taxation in which an individual s bene t from public goods is tied to his or her income earning ability can be incorporated into modern optimal tax theory if lindahl s methods are applied to that view of bene ts rst best optimal policy can be characterized analytically as depending on a few potentially estimable statistics in particular the coe cient of complementarity between public goods and innate talent constrained optimal policy with a pareto e cient objective that strikes a balance controlled by a single parameter between this principle and the familiar utilitarian criterion can be simulated using conventional constraints and methods a wide range of optimal policy outcomes can result including those that match well several features of existing policies to the extent that such an objective re ects the mixed normative reasoning behind prevailing

credit market imperfections labor markets and leverage dynamics in emerging economies abstract emerging economies emes have different credit and labor market structures relative to advanced economies we document that economies with larger self employment shares tend to exhibit less countercyclical leverage dynamics we build a model where formal credit markets input credit relationships and the structure of labor markets interact that 1 captures a comprehensive set of eme business cycle regularities and 2 rationalizes our new fact the interaction between firms net worth interfirm input credit and self employment underlying our framework is critical for explaining our fact and is supported by the data

gender entrepreneurship and the formal informal dilemma evidence from indonesia summary this study analyzes the preferences of entrepreneurs about formality and focuses on the role of gender relying on original data collected in indonesia we unpack the differences between various types of female entrepreneurs currently in the informal sector according to their preferences about formalization contrary to the existing literature we find that female entrepreneurs possess highly nuanced preferences about formalization that are conditional on many factors the preference for formalization is strongest among female entrepreneurs who are older married rural based and have recently started their firms our work contributes to research that seeks to better understand entrepreneurial preferences and the role that gender plays

multidimensional affluence theory and applications to germany and the us this article suggests multidimensional affluence measures for the top of the distribution in contrast to commonly used top income shares they allow the analysis of the extent intensity and breadth of affluence in several dimensions within a common framework we illustrate this by analysing the role of income and wealth as dimensions of multidimensional well being in germany and the us in 2007 as well as for the us over the period 1989 2007 we find distinct country differences with the country ranking depending on the measure while in germany wealth predominantly contributes to the intensity of affluence income is more important in the us

on measuring deprivation and the standard of living in a multidimensional framework on the basis of aggregate data in measuring social deprivation in a multidimensional framework ideally one should first measure each individual s overall deprivation and then aggregate the overall deprivation levels of all individuals however given only aggregate data one is often forced to measure social deprivation in terms of each attribute separately and then to aggregate them so as to get the overall social deprivation this paper shows that it is only under extremely stringent conditions that this procedure would always yield the same result as the conceptually sound procedure referred to earlier a similar difficulty also arises in measuring a society s standard of living

identifying deprivation profiles in spain a new approach usually an indirect approach for measuring deprivation or poverty is used with poverty lines however some studies have used a direct approach to measure deprivation or poverty the aim of this study is improving the identification of the poor people the central point of the concept of deprivation used is related to the opportunity to have or do something therefore deprivation means an inability to get the goods facilities and opportunities which are usual in the household environment since all of the needed variables are categorical the latent class model is used to solve this problem because it is the best model to achieve this objective

optimal provision of a public good with costly exclusion we examine the problem of providing a non rival and excludable public good to individuals with the same preferences and differing contributing capacities exclusion from the public good is costly in the sense that if two different quantities of the public good are consumed in the community then the sum of the costs of providing the two quantities must be borne by contrast costless exclusion only requires the cost of the largest quantity consumed of the public good to be financed we show that despite its important cost providing public goods in different quantities is often part of any optimal provision of public good when the public authority is imperfectly informed about the agents contributive capacities in the specific situation where individuals have an additively separable logarithmic utility function we provide a complete characterization of the optimal exclusion structure in the two type case we also show that the preference for such a costly exclusion is more likely when the heterogeneity in the population or income is large and when the aversion to utility inequality is important

the quality of employment and decent work definitions methodologies and ongoing debates this article explores the development of concepts related to the quality of employment in the academic literature in terms of their definition methodological progress and ongoing policy debates over time these concepts have evolved from simple studies of job satisfaction towards more comprehensive measures of job and employment quality including the international labour organization s concept of decent work launched in 1999 this article compares the parallel development of quality of employment measures in the european union with the ilo s decent work agenda and concludes that the former has advanced much further due to more consistent efforts to generate internationally comparable data on labour markets which permit detailed measurements and international comparisons in contrast decent work remains a very broadly defined concept which is impossible to measure across countries we conclude by proposing three important differences between these two scenarios that have lead to such diverging paths the lack of availability of internationally comparable data the control over the research agenda by partisan social actors and a prematurely mandated definition of decent work that is extremely vague and all encompassing

quality over quantity reexamining the link between entrepreneurship and job creation although much has been written about the quantity of jobs created by entrepreneurs scholars have yet to examine the quality of these jobs in this article the authors begin to address this important issue by examining nearly 5 000 businesses that began operations in 2004 they investigate the extent to which nascent employers provide what many think of as quality jobs those offering health care coverage and a retirement plan the authors find that because of small scale constrained resources and protection from institutional pressures start up companies do not provide their employees with either of these proxies for job quality and their likelihood of offering health or retirement benefits increases only marginally over their first six years of operation the finding that entrepreneurs impressive record of job creation is not matched by a similarly impressive outcome with respect to job quality challenges policymakers to ensure that entrepreneurs are encouraged to create quality employment opportunities in the course of creating new businesses abstract from author

informal self employment and macroeconomic fluctuations article i nfo article history informal self employment is a major source of employment in developing countries its cyclical behavior is important to our understanding of the functioning of ldc labor markets but turns out to be surprisingly complex we develop a flexible model with two sectors a formal salaried tradable sector that may be affected by wage rigidities and an informal non tradable self employment sector faced with liquidity constraints to entry this labor market is then embedded in a standard small economy macro model we show that different types of shocks interact with different institutional contexts to produce distinct patterns of comovement between key variables of the model relative salaried self employed incomes relative salaried self employed sector sizes and the real exchange rate model predictions are then tested empirically for argentina brazil colombia and mexico we confirm episodes where the expansion of informal self employment is consistent with the traditional segmentation views of informality however we also identify episodes where informal self employment behaves pro cyclically here informality is driven by relative demand or productivity shocks to the non tradable sector

public goods self selection and optimal income taxation using the self selection approach to tax analysis this paper derives a modified samuelson rule for the provision of public goods when the government deploys an optimal nonlinear income tax this approach gives a straightforward interpretation of the central result in this area generalises it and provides a simple characterisation of optimal policy in a wide range of circumstances the analysis also emphasises and clarifies the significance of the choice of numeraire for the optimality of decentralising public spending decisions it is well known that the famous samuelson rule for the provision of public goods may not be applicable when the tax revenues used to finance the public goods come from distorting taxes the principle was recognized as long ago as pigou 1947 long before the samuelson rule was devised pigou saw that in addition to the resource cost involved in transferring funds from the private to the public sector there was a deadweight loss involved from this insight he suggested that the criterion for providing public goods should be more stringent than the samuelson rule would later suggest in particular one might expect that the inclusion of the deadweight loss of taxes as part of the cost of providing a public good would lead to a reduction in its optimal provision relative to a situation in which lump sum taxes were available the problem was investigated more systematically by atkinson and stern 1974 who considered the case in which a public good is financed by a set of optimal commodity taxes all individuals were assumed to be identical so efficiency alone dictated the objective they found that no prima facie case could be made for the pigou position that the use of distortionary taxes called for a reduction in the supply of the public good their analysis clearly showed that there were two influences at work when the financing of a public good was by distorting taxes on the one hand

wellbeing inequality and preference heterogeneity standard measures of multidimensional inequality implicitly assume common preferences for all individuals and hence are not sensitive to preference heterogeneity among the members of society in this paper we measure the inequality of the distribution of equivalent incomes which is a preference sensitive multidimensional well being measure to quantify the contribution of preference heterogeneity to well being inequality we use a decomposition method that calculates well being inequality in different counterfactual distributions we focus on four sources of well being inequality the correlation between outcomes and preferences the preference heterogeneity the correlation between the outcome dimensions and the inequality within each of the outcome dimensions we find that preference heterogeneity accounts for a considerable part of overall well being inequality in russia for the period of 1995 to 2005 this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

what is social inequality and why does it matter evidence from central and eastern europe as distinct from income or wealth inequality social inequality is currently poorly understood and at best unevenly measured we conceptualize social inequality as the relative position of individuals along a number of dimensions that measure achieved outcomes and innovatively expectations about future outcomes using data from 12 central and eastern european countries we find that cross national patterns of social inequality differ significantly from patterns derived from income inequality measures moreover our measure of social inequality is much better correlated than income inequality with other country differences such as higher levels of economic performance and human development and stronger political institutions

shadow economies at times of banking crises empirics and theory this paper investigates the response of the shadow economy to banking crises our empirical analysis based on a large sample of countries suggests that the informal sector is a powerful buffer which expands at times of banking crises and absorbs a large proportion of the fall in official output to rationalise our evidence we build a dynamic stochastic general equilibrium model which accounts for financial and labour market frictions and for nominal rigidities in line with the empirical literature on the shadow economy we assume that in the informal sector access to external finance is limited and the production technology is relatively more labour intensive following a banking shock in the official sector the model predicts a large negative transmission to the unofficial economy that substantially dampens the overall effect of the shock

counting and multidimensional poverty measurement this paper proposes a new methodology for multidimensional poverty measurement consisting of an identification method k that extends the traditional intersection and union approaches and a class of poverty measures m our identification step employs two forms of cutoff one within each dimension to determine whether a person is deprived in that dimension and a second across dimensions that identifies the poor by counting the dimensions in which a person is deprived the aggregation step employs the fgt measures appropriately adjusted to account for multidimensionality the axioms are presented as joint restrictions on identification and the measures and the methodology satisfies a range of desirable properties including decomposability the identification method is particularly well suited for use with ordinal data as is the first of our measures the adjusted headcount ratio we present some dominance results and an interpretation of the adjusted headcount ratio as a measure of unfreedom examples from the us and indonesia illustrate our methodology

impacts of the malawi social cash transfer program on household food and nutrition security abstract this study uses panel data for 3290 households to analyze the effect of an unconditional cash transfer on food and nutrition security among ultra poor and vulnerable households study data are from an impact evaluation of the government of malawi s social cash transfer program a cluster randomized control trial that employs both random selection and random assignment we use the difference in differences specification to estimate average treatment effects of the program on three components of food and nutrition security current economic vulnerability diet quantity and diet quality results show protective program impacts during the lean season on diet quantity as beneficiary households are 11 percentage points more likely to consume multiple meals per day than control households p 001 have a higher level of apparent caloric availability 267 49 kcal p 05 are 10 percentage points less likely to be food energy deficient p 05 and have a reduced hunger depth 111 11 kcal p 05 however study findings indicate that after one year of program exposure beneficiary households have experienced little improvement in diet quality or current economic vulnerability to food insecurity clear policy and program implications emerge related to the purchasing power of the cash transfer particularly during the lean season and the importance of integrated social protection initiatives

poverty and the distribution of material hardship public concern with poverty derives in large part from the assumption that low income families cannot afford necessities yet official poverty statistics focus on measuring income not on measuring material hardship two surveys of chicago residents measure whether families could afford food housing and medical care a family s official income to needs ratio explained 24 percent of the variance in the amount of material hardship it reported adjustments for family size age health noncash benefits home ownership and access to credit explain another 15 percent variations in permanent income explain almost none of the remaining variance in hardship among families with the same official income toneeds ratio material hardship varies by age family size and composition

toward an understanding of economic growth in africa a reinterpretation of the lewis model summary we develop a model economy that has many of the features of lewis 1954 but that also includes an in between sector as described by lewis 1979 our model underscores the importance of the following determinants of structural change i productivity growth in the agricultural sector ii productivity growth in the nonagricultural sector and iii the terms of trade public investment enhances productivity growth in all sectors but when it is financed by foreign inflows it also causes a real exchange rate appreciation leading to a contraction in the open modern sector these results provide a partial explanation for recent patterns of growth in rwanda and elsewhere in africa where the nontradables or what we call the in between sector has expanded more rapidly than the tradable sector our results also highlight the dilemma faced by poor countries in dire need of public investment with a very limited tax base

remittances entrepreneurship and employment dynamics over the business cycle abstract we incorporate remittances and micro entrepreneurship self employment into a small open economy business cycle model with capital and labor market frictions countercyclical remittances moderate the decline of households consumption during recessions these remittances also are used to finance the start up costs of microenterprises that bolster households income during economic downturns we show that the positive income effect from countercyclical remittances also leads to a decrease in salaried labor supply which generates offsetting upward pressure on wages during recessions and adversely affects the recovery of the economy consistent with the microeconomic evidence the behavior of remittances decisively affects labor force participation and the composition of employment between non salaried and salaried employment over the business cycle the model delivers labor market and aggregate cyclical dynamics that are consistent with the mexican data including a highly volatile and countercyclical unemployment rate

inequality and attainment in a dual labor market models of wage determination and sector attainment are estimated for a cohort of young men in a dual labor market neoclassical economic vs dual labor market views on market equilibrium are contrasted although schooling is rewarded similarly in the primary and secondary sectors other results support the dual labor market view that employment in the primary sector is rationed via a queuing mechanism

shadow economies size causes and consequences using various methods the size of the shadow economy in 76 developing transition and oecd countries is estimated average size varies from 12 percent of gdp for oecd countries to 23 percent for transition countries and 39 percent for developing countries increasing taxation and social security contributions combined with rising state regulations are driving forces for the increase of the shadow economy especially in oecd countries according to some findings corruption has a positive impact on the size of the shadow economy and a growing shadow economy has a negative effect on official gdp growth

the food stamp program and food insufficiency food stamp participants have higher food insufficiency rates than eligible nonparticipants even after controlling for other factors given the food stamp program s prominent role in the alleviation of hunger this is a counterintuitive result we conjecture that these higher rates are due to adverse selection insofar as households more likely to be food insufficient are also more likely to receive food stamps we establish a theoretical framework to address this adverse selection using a simultaneous equation model with two probits we show that once one controls for this adverse selection food stamp recipients have the same probability of food insufficiency as nonrecipients copyright 2001 oxford university press

recessions and the vulnerable abstract this study evaluates the impact of recessions on households vulnerable to poverty the results indicate that recessions impact vulnerable households asymmetrically in comparison to the impact of growth on poor households we also demonstrate that this outcome is significantly influenced by a country s extent of development we argue that a direct consequence of the foregoing is that the efficacy of growth in poverty reduction tends to be under stated by conventional measures of poor households responses to economic growth and that safety nets need to be constructed to incorporate vulnerability to recessions

human development means and ends from growth to basic needs sometimes the change in the fashions of thinking about development appears like a comedy of errors a lurching from one fad to another economic growth employment creation jobs and justice redistribution with growth basic needs bottom up development participatory development sustainable development market friendly development liberation liberalisation human development thus goes the carousel of the slogans but this would not be a correct record there has been an evolution in our thinking about development both internal logic and new evidence have led to the revision of our views previous and partly discarded approaches have taught us much that is still valuable and our current approach will surely be subject to criticisms a brief survey of the evolution of our thinking may be helpful the discussion started in the 1950s influenced by arthur lewis 1955 and others who emphasised economic growth as the key to poverty eradication even at this early stage sensible economists and development planners were quite clear in spite of what is now often said in caricature of past thought that economic growth is not an end in itself but a performance test of development arthur lewis defined the purpose of development as widening our range of choice exactly as the human development reports of the united nations development programme do today three justifications were given for the emphasis on growth as the principal performance test one justification assumed that through market forces such as the rising demand for labour rising productivity rising wages lower prices of the goods bought by the people economic growth would spread its benefits widely and speedily and that these benefits are best achieved through growth even in the early days some sceptics said that growth is not necessarily so benign they maintained that in certain conditions such as increasing returns restrictions to entry monopoly power unequal distribution of income and assets growth gives to those who already have it tends to concentrate income and wealth in the hands of the few this is where the second assumption came in it was that governments especially democratic ones are concerned with the fate of the poor therefore progressive taxation social services and other government interventions would

direct versus indirect taxation the design of the tax structure revisited this article studies the optimal direct indirect tax mix problem when individuals differ in several unobservable characteristics productivity and endowments it presents general expressions for the optimal commodity tax rates and proves that contrary to atkinson and stiglitz s 1976 result differential commodity taxation remains a useful instrument of tax policy even if preferences are separable between labor and produced goods when cross substitution effects are zero the expressions resemble traditional many households ramsey rules in a cobb douglas illustration where endowments differ only in good 1 interpreted as wealth the tax on good 2 provides an indirect way to tax the unobservable wealth

modelling the informal sector formally abstract the theoretical characterization of formal informal sector dualism by labor market dualism is integrated with its empirical characterization by size dualism by supposing that the minimum formal sector wage is only enforced for firms greater than a certain size a firm s size varies directly with the talent of its enterpreneur manager and the choice between formal and informal sector entrepreneurship is determined endogenously it is then shown that the size gap between the smallest formal sector firm and largest informal sector firm varies directly with the formal informal sector wage differential which in turn is shown as expected to increase the further is the minimum wage above the market clearing wage the comparative statics of changes in the size of the firm above which the minimum wage is enforced are also examined

public goods with costly access abstract we examine the optimal allocation of excludable public goods with a private access cost that some consumers may not be able to afford the full information benchmark is presented first then individuals access costs and income levels are private information when high income consumers have low access cost asymmetric information increases the cost of subsidizing the poor for accessing the public good and inequality increases when the low access cost consumers have the lower income subsidizing the poor may involve countervailing incentives but inequality decreases finally monopoly provision exacerbates underprovision of the poor particularly of those with low access cost

measuring the well being of the poor using income and consumption we examine the relative merits of consumption and income as measures of the material well being of the poor consumption offers several advantages over income because consumption is a more direct measure of well being than income and is less subject to underreporting bias measurement problems with income are problematic for analyses of changes in well being of the poor because the biases appear to have changed over time and are correlated with government policies on the other hand income is often easier to report and is available for much larger samples providing greater power to test hypotheses we begin by considering the conceptual and pragmatic reasons why consumption might be better or worse than income then we employ several empirical strategies to examine the quality of income and consumption data first we compare income and consumption reports for those with few resources as well as their assets and liabilities to examine measurement errors and under reporting second we examine other evidence on the internal consistency of reports of low income or consumption third we compare how well micro data in standard datasets weight up to match aggregates for classes of income and consumption that are especially important for low resource families fourth we validate income and consumption measures by comparing them to other measures of hardship or material well being although the evidence tends to favor consumption measures our analyses suggest that both measures should be used to assess the material well being of the poor

inequality of wellbeing a multidimensional approach an important aspect of multidimensional wellbeing distributions is the correlation between different dimensions we propose two indices for measuring multidimensional inequality derived from two underlying social evaluation functions these functions aggregate both across dimensions and across individuals the social evaluation functions differ only with respect to the sequencing of aggregation aggregating first across dimensions is more attractive since it allows the inequality index to depend on the correlation between dimensions we illustrate both indices and the impact of correlation sensitivity using russian household data between 1995 and 2005 for four dimensions of wellbeing expenditure health schooling and housing quality

can africa compete with china in manufacturing the role of relative unit labor costs in this paper examine sub saharan africa s ssa bilateral trade and cost competitiveness with china we review patterns of bilateral trade between ssa and china showing an extraordinary imbalance in the structure of trade in that china overwhelmingly exports manufactured products to ssa and almost exclusively imports primary products in return our principal means of assessing the competitiveness of ssa s manufacturing sector vis a vis china are measures of relative unit labor costs rulc we find that african rulc levels have generally been very high relative to china but declined over the 2000s as china s wages have risen faster than chinese productivity while the reverse is true for the ssa countries in our sample nevertheless rulc vis a vis china remained elevated for many ssa countries as of 2010 generally high rulc along with weaknesses in the business climate suggest that most ssa countries are unlikely to be competitive in labor intensive manufacturing any time soon

informality and the labor market effects of financial crises abstract we provide evidence based on a large sample of countries on the effects of financial crises on key labor market indicators including official and unofficial employment unemployment and the participation rate crises are followed by a drop in the official market participation rate and by an increase in informal employment these responses are strongly persistent empirical results are then interpreted with a dsge model which accounts for informality and for financial and labor market frictions in this framework the informal sector acts as a buffer which absorbs workers in bad times and vice versa our simulations suggest the informal sector also is a crisis amplifier for the official economy for a given financial shock the ensuing contraction in the official economy is deeper and more persistent the larger the initial size of the unofficial sector this implies that in less developed economies financial crises cause a relatively stronger reallocation of inputs towards less efficient sectors expose a larger fraction of the population to the adverse effects of informality cause a sharper deterioration of public finances limiting governments ability to supply public goods and to engage in countercyclical fiscal policies

the evolution of world inequality in well being in this paper we use the tools offered by the recent literature on multidimensional inequality measurement to investigate the evolution of the inequality in well being across different countries during 1975 2000 we focus on three important dimensions of life standard of living health and education inequality in the three dimensions shows a different trend during 1975 2000 we propose a flexible measure of well being to quantify the evolution of overall intercountry well being inequality the empirical results are sensitive to different normative choices on the trade offs between the different dimensions especially the concave transformation of income turns out to be decisive for the evolution of world inequality in well being

informal employment safety net or growth engine summary is informal employment a safety net or a growth engine to address this question this paper studies the trends and cycles of informal employment it first presents a theoretical model of long and short run behavior of informal labor then it analyzes these relationships empirically using the share of self employment in the labor force as the proxy for informal employment in the long run informality is larger when labor productivity is lower government services weaker and business flexibility less prevalent in the short run informal employment behaves counter cyclically indicating that it acts primarily as a safety net the degree of counter cyclicality however varies inversely with the size of informal labor itself

employment and firm heterogeneity capital allocation and countercyclical labor market policies abstract developing and emerging economies have large employment shares in micro and small firms which are characterized by limited access to formal financing and high reliance on input credit these economies implemented a host of countercyclical labor market policies amid the global financial crisis gfc but labor market data limitations prevent detailed empirical assessments of the effectiveness of these policies we develop a business cycle model with frictional labor markets consistent with the employment and firm structure of these economies and assess the aggregate impact of key countercyclical labor market policies implemented amid the gfc improving job intermediation for large firms is particularly effective in aiding recoveries policies targeting smaller firms yield limited aggregate benefits differences in labor productivity and sectoral contribution to employment and output across firm categories are key in explaining the response to policy

global financial risk aggregate fluctuations and unemployment dynamics abstract we use a panel structural vector autoregression methodology to study the impact of global financial risk shocks in emerging market economies emes versus small open advanced economies soaes the short term responses of gdp investment and un employment are similar in emes compared to soaes but their medium term responses differ considerably in emes the shock propagates less across gdp and investment and the response of unemployment is prominently more subdued further analysis suggests that while in emes these dynamics can be traced back to the response of country interest rates to global financial risk shocks and to the average degree of firm informality in soaes these factors are not at play instead for soaes the dynamics of bank credit can matter to some degree but more broadly a global financial risk shock passes through more directly into the economy

government effectiveness and regional variation in informal employment abstract this article analyses the role of government effectiveness in the determination of informal employment a theoretical model is developed in which local governance and worker skill level are assumed to influence the decision of the worker whether to seek employment in the formal or informal sectors the model is assessed empirically using data from brazil where almost half of the urban labour force is employed informally the empirical analysis supports the predictions of the model and suggests that the probability of a worker being employed informally is lower in regions with better governance and higher average education

robust multidimensional poverty comparisons we demonstrate how to make poverty comparisons using multidimensional indicators of well being showing in particular how to check whether the comparisons are robust to aggregation procedures and to the choice of multidimensional poverty lines in contrast to earlier work our methodology applies equally well to what can be defined as union intersection or intermediate approaches to dealing with multidimensional indicators of well being to make this procedure of some practical usefulness the paper also derives the sampling distribution of various multidimensional poverty estimators including estimators of the critical poverty frontiers outside which multidimensional poverty comparisons can no longer be deemed ethically robust the results are illustrated using data from a number of developing countries

optimal indirect and capital taxation we consider an environment in which agents skills are private information and follow arbitrary stochastic processes we prove that it is typically pareto optimal for an individual s marginal benefit of investing in capital to exceed his marginal cost of doing so this wedge is consistent with a positive tax on capital income we also prove that it is pareto optimal for the marginal rate of substitution between any two consumption goods to equal the marginal rate of transformation this lack of a wedge is consistent with uniform taxation of consumption goods within a period

sharing the cost of a public good an incentive constrained axiomatic approach we study the problem of provision and cost sharing of a public good in large economies where exclusion complete or partial is possible we search for incentive constrained efficient allocation rules that display fairness properties population monotonicity says that an increase in population should not be detrimental to anyone demand monotonicity states that an increase in the demand for the public good in the sense of a first order stochastic dominance shift in the distribution of preferences should not be detrimental to any agent whose preferences remain unchanged under suitable domain restrictions we give an explicit characterization of all incentive constrained efficient allocation rules we then show that there exists a unique incentive constrained efficient and demand monotonic allocation rule the so called serial rule in the binary public good case the serial rule is also the only incentive constrained efficient and population monotonic rule

welfare as equity equivalents equity or its counterpart inequity plays a fundamental role in the evaluation of social welfare in different dimensions in this paper we revisit the concept of inequity in the sense of unequal distributions across individuals time and states of the world using a unified framework that generalizes the standard expected discounted utilitarianism approach we propose a general measure of welfare as equity equivalents and a corresponding inequity index we show that allowing for different attitudes toward inequity across different dimensions covers a scope of possible inequity preferences with different interpretations we then prove that the order of aggregation across the different dimensions matters for welfare evaluations finally we show that many of the welfare theoretical approaches recently developed in the literature can be interpreted as special cases of this general framework

the quality of employment qoe in nine latin american countries a multidimensional perspective abstract this paper proposes a methodology for measuring the quality of employment from a multidimensional and public policy perspective in latin american developing countries argentina bolivia brazil chile colombia ecuador mexico paraguay peru and uruguay using household and labour force survey data from 2015 the purpose of this paper is to demonstrate that the qoe can be measured using a multidimensional methodology that can inform policy makers about the state of their labour markets in a way that complements traditional variables such as participation or unemployment rates which are not always good indicators of labour market performance in developing countries with large informal sectors building on the framework of the capability approach as well as on previous work on multidimensional poverty we use the alkire foster af method to construct a synthetic indicator of the quality of employment qoe at an individual level we select three dimensions that must be considered as both instrumentally and intrinsically important to workers and the functions and capabilities generated by their employment situation income job security and employment conditions job security is then divided into two sub dimensions occupational status and job tenure as is employment conditions social security affiliation and excessive working hours a threshold is then established within each dimension and sub dimension to determine whether a person is deprived or not within each dimension before establishing an overall cut off line and calculating composite levels of deprivation the results generated by this indicator are first highly relevant to policy makers as they allow for the precise identification of groups of vulnerable workers as well as of dimensions and indicators which contribute to deprivation in the labour market second they extend the debate about employment in developing countries to variables not commonly considered by the literature as being critical to the well being of workers and their dependents such as occupational status and job tenure third this paper highlights important difference between latin american countries both in terms of the overall qoe index result as well as its component dimensions while chile presents the best results in the region paraguay presents the worst followed by mexico bolivia and peru however chile peru columbia and brazil for example have the biggest problem with job rotation finally the paper highlights that low rates of unemployment are not necessarily related to low rates of deprivation in terms of the qoe in fact in some countries analysed e g mexico the opposite is true

taxes inequality and the size of the informal sector abstract in this note we develop a simple heterogeneous agent model with incomplete markets to explain the prevalence of a large low productivity informal sector in developing countries in our model taxes levied on formal sector agents are used to finance the provision of a productive public infrastructure which creates a productivity premium from formalization our model offers endogenous differentiation of rich and poor countries complete formalization is an equilibrium only in countries with the appropriate initial conditions we discuss the existence of this equilibrium and highlight the ambiguous effect of taxes

the comparison of multi dimensioned distributions of economic status the literature on inequality measurement has been largely concerned with single dimensioned indicators this paper explores some of the issues which arise when there are several dimensions to inequality and these are not readily reduced to a single index concentrating particularly on the two dimensioned case we make use of results on multi variate stochastic dominance in portfolio theory extending these and applying them to the measurement of inequality the use of the dominance conditions is illustrated by an application to the international distribution of income and life expectancy

informality and rent seeking bureaucracies in a model of long run growth abstract this paper explores the links among growth the informal economy and rent seeking bureaucracies the presence of congestion associated with the enforcement of property rights implies that informality can be useful whether bureaucratic rent seeking is detrimental to growth then depends on how good a substitute informality is to production in the formal sector in order to create profits which can be appropriated rent seeking bureaucrats limit entry into the formal economy as a result firms operate in the informal sector even when the cost of informality is high in which case lower growth emerges however when the cost of informality is low a large number of firms choose to operate informally irrespective of entry conditions in the latter case growth is unaffected by a rent seeking bureaucracy as entry restrictions in the formal economy do not bind

discontinuous losses from poverty generalized pα measures and optimal transfers to the poor abstract this paper examines the distributional properties of poverty measures which are discontinuous at the poverty line it is shown that among all the additive poverty measures only those measures with some discontinuous jump at the poverty line are such that it is optimal to allocate a given antipoverty budget either to the richest of the poor or to the poorest of the poor or to both a special class of such poverty measures is an extension of the well known p the properties of which are investigated

corruption extortion and evasion corruption evasion and the abuse of power and the possibility thereof are pervasive features of economic activity a prominent instance is tax collection this paper examines the implications of corruptibility and the potential abuse of authority for the effects and optimal design of potentially non linear tax collection schemes amongst the findings are that the distributional effects of evasion and corruption are unambiguously regressive under the kinds of schemes usual in practice and collecting progressive taxes without inducing evasion or corruption may require that inspectors be paid commission on high income reports but not on low with the cost of this potentially creating what seems to be a previously unnoticed trade off between equity and efficiency

measuring poverty and differences in family composition the equivalence scales used to adjust for differences in family composition when measuring poverty exhibit considerable variation this paper suggests an alternative approach that allows for differences in social judgements regarding the treatment of different types of family and examines the relation with the choice of poverty measure the resulting dominance criteria cannot provide a complete ranking but allow the extent of disagreement to be identified their application is illustrated by the example of changes in child benefits copyright 1992 by the london school of economics and political science

the impact of droughts and floods on food security and policy options to alleviate negative effects this article introduces an analytical framework for understanding the impacts of droughts and floods on rural livelihoods based on sen s entitlement approach and applies the framework to the recent food crises in malawi weather shocks trigger a sequence of entitlement failures which can result in a famine unless public action intervenes to mitigate these impacts policy responses can compensate for failures of production based entitlement free or subsidized input distribution labor based entitlement public works programs or employment based safety nets trade based entitlement grain reserve management or food pricing policies and transfer based entitlement food aid or cash transfers

efficient mechanisms for public goods with use exclusions constrained efficient provision of an excludable public good is studied in a model where preferences are private information the provision level is asymptotically deterministic making it possible to approximate the optimal mechanism with a mechanism that provides a fixed quantity of the good and charges fixed user fees for access in general the fixed fees involve third degree price discrimination but if names are uninformative about preferences the analysis provides a justification for average cost pricing copyright 2004 wiley blackwell

asymmetric information bargaining problems with many agents a yes or no decision must be made about some issue all agents must agree the coase theorem asserts that the efficient outcome will always result suppose the value positive or negative that an individual attaches to an affirmative decision is privately known to that individual it is proved under very mild conditions that with independent types as the number of agents increases the probability of an affirmative efficient decision goes to zero an example in which it is common knowledge that an affirmative decision is efficient and yet the probability of such a decision goes to zero is given

efficiency welfare and political competition we study political competition in an environment in which voters have private information about their preferences our framework covers models of income taxation public goods provision or publicly provided private goods politicians are vote share maximizers they can propose any policy that is resource feasible and incentive compatible they can also offer special favors to subsets of the electorate we prove two main results first the unique symmetric equilibrium is such that policies are surplus maximizing and hence first best pareto efficient second there is a surplus maximizing policy that wins a majority against any welfare maximizing policy thus in our model policies that trade off equity and efficiency considerations are politically infeasible jel codes c72 d72 d82 h21 h41 h42

transfer principles in income redistribution abstract dalton s principle of transfer for income redistribution says that society will be better off when a unit of income in transferred from a richer to a poorer individual this paper investigates the conjunction of a natural extension of dalton s principle which says that any combination of a socially desirable transfer with its inverse at uniformly higher levels of income will have positive social benefit and a traditional utilitarian egalitarian formulation of social welfare the transfer principles involved in the extension of dalton s rule correspond to stochastic dominance relations between income distributions with a common mean and lead to the conclusion that when and g are income distributions the social welfare of is larger than that of g if e ax x ax g x for all positive a this conclusion is intimately connected with a measure of income inequality studied by kolm

short long and spatial dynamics of informal employment di caro p and nicotra g short long and spatial dynamics of informal employment regional studies this paper analyses regional shadow labour markets cross regional migration flows are introduced in a stochastic two sector model used to study the effects of regional interactions on informality empirical results show that informal activities across italian regions are driven by the inefficient provision of public goods and high taxes regional connections are found to be significant place specific reactions of informal employment to national shocks in the official economy are investigated finding that the informal sector can act as a complement to or a substitute for formal activities the summary of the results and policy conclusions are then discussed

capital income taxation when inherited wealth is not observable this paper extends the atkinson stiglitz model of direct and indirect taxation to a dynamic setting with two unobservable characteristics productive ability and inherited wealth bequests are motivated by the joy of giving a child s inheritance is a random variable with a probability distribution that depends on his parent s investment in a bequest technology public borrowing is assumed and implies the modified golden rule we study the optimal tax policy when two instruments are available a non linear wage income tax and a proportional tax on capital income we show that the second instrument ought in general to be used but that the tax rate is not necessarily positive however a positive tax rate is more likely when there is a positive correlation between inherited wealth and innate ability

returns to physical capital in ethiopia comparative analysis of formal and informal firms summary this paper investigates returns to capital in the formal and informal sectors in ethiopia using parametric and semi parametric regression techniques results show that there is a higher annual median return to capital in the informal sector 52 140 than the formal sector 15 21 however informal firms might benefit from working formally as their capital stock gets larger marginal returns in the informal sector increase with firm size access to reliable markets market uncertainty and owners labor supply on the other hand marginal returns to capital and overall profitability decrease with capital stock contrary to the poverty trap hypothesis

job loss credit constraints and consumption growth we use direct evidence on credit constraints to study their importance for household consumption growth and for welfare we distentangle the direct effect on consumption growth of a currently binding credit constraint from the indirect effect of a potentially binding credit constraint which generates consumption risk our data is focused on job losers we find that less than 5 of job losers experience a binding credit constraint but for those that do they experience significant welfare losses and consumption growth is 24 higher than for the rest of the population however even among those who are currently unconstrained and who are able to borrow if needed consumption responds to transitory income

employment vulnerability and earnings in urban west africa this article develops indicators of vulnerability in employment in seven economic capitals of west africa and studies their links with individual incomes quantitative distributional and qualitative analyses show that vulnerability compensating mechanism is mainly seen in the informal sector in the upper tail of the earnings distribution and particularly in the circumstance of visible underemployment employment vulnerability is not compensated for the poorest workers in the private sector long job queues and weak institutional protection of workers may have reduced bargaining power in the formal sector

gender and multidimensional poverty in nicaragua an individual based approach most existing empirical papers concerned about multidimensional poverty use the household as the unit of analysis so that the multidimensional poverty status of the household is equated with the multidimensional poverty status of all its members this assumption ignores intra household inequalities additionally households containing both a female and a male cannot contribute to a gender gap in poverty so gender differentials in poverty cannot be estimated but the sustainable development goals have put special emphasis on gender equality therefore new measures able to capture the gender differences are needed consequently in this paper we propose an individual based multidimensional poverty measure in order to estimate the three i s of multidimensional poverty incidence intensity and inequality in nicaragua as well as the gender differentials we also estimate logit regressions to better understanding the determinants of multidimensional poverty in this country overall we find that there are statistically significant gender differences in multidimensional poverty in nicaragua but they are estimated to be small and lower than 5 however the gender differential in inequality is larger than 10 and it suggests that multi dimensionally poor women are living in very intense poverty when compared with multi dimensionally poor men we also find that the elderly and children are the most vulnerable people in terms of multidimensional poverty in this country furthermore when information on employment domestic work and social protection is considered in the analysis the gender gaps become more substantial and women are more likely to be poor than men

institutions informal labor markets and business cycle volatility i build a business cycle labor search and matching model with informal labor markets which shows that different dimensions of institutional quality have similar effects on the size of the informal sector but different effects on the relationship between informality and long run macroeconomic outcomes and between informality and labor market volatility for the same change in informal sector size changes in different proxies for institutional quality have contrasting quantitative implications for the steady state and the volatility of the labor market despite having similar consequences on other macroeconomic variables these results highlight the importance of identifying the source behind changes in the size of the informal sector to characterize the link between informality and business cycle dynamics

what is a good job a new measure of labor market success no currently available index allows investigators to estimate the overall desirabitlity of specific jobs with data collected in the 1980 survey of job charactersitics an index of job desirability ijd can be constructed to fill this gap the ijd incorporates 13 nonmonetary job characteristics along with measures of earnings and weights all job characteristics according to their effects on workers judgments about how good their current jobs are compared with an average job while earnings are the most important single determinant of a job s desirability the 13 nonmonetary job characteristics together are twice as important as earnings unlike occupational status and earnings the proposed index explains almost the entire effect of race sex educational attainment and experience on job ratings it also explains almost all the variation in job ratings provided by workers in different occupations furthermore taking account of nonmonetary job characteristics more than doubles the estimated level of

self employment in the developing world summary this paper analyzes heterogeneity among the self employed in 74 developing countries representing two thirds of the population of the developing world after profiling how worker characteristics vary by employment status it classifies self employed workers outside agriculture as successful or unsuccessful entrepreneurs based on two measures of success whether the worker is an employer and whether the worker resides in a non poor household four main findings emerge first jobs exhibit a clear pecking order with household income and worker education highest for employers followed by wage and salaried employees non agricultural own account workers non agricultural unpaid family workers and finally agricultural workers second a substantial minority of own account workers reside in non poor households suggesting that their profits are often a secondary source of household income third as per capita income increases across countries the structure of employment shifts rapidly first out of agriculture into unsuccessful non agricultural self employment and then mainly into non agricultural wage employment finally roughly one third of the unsuccessful entrepreneurs share similar characteristics with their successful counterparts suggesting they have the potential to be successful but face constraints to growth the authors conclude that although interventions such as access to credit can benefit a substantial portion of the self employed effectively targeting the minority of self employed with higher growth potential is important particularly in low income contexts the results also highlight the potential benefits of policies that facilitate shifts in the nature of work first from agricultural labor into non agricultural self employment and then into wage and salaried jobs

public good provision with many participants for a nonexcludable public good with benefit and cost functions independent of the number of participants this paper studies second best allocations under bayesian interim incentive compatibility and interim individual rationality as the number of participants becomes large second best provision levels converge in distribution to first best levels if the latter are bounded second best provision levels become large in absolute terms but small relative to first best levels if benefit and cost functions are isoelastic in contrast for an excludable public good the ratio of second best to first best levels is bounded away from zero

the impact of the social cash transfer scheme on food security in malawi abstract the malawi social cash transfer scheme scts was launched in 2006 to improve food security by directly providing cash transfers to the country s most destitute households although government implemented cash transfer schemes have gained popularity throughout latin america these schemes are just emerging in africa while where there is evidence of the beneficial impact of cash transfers on food security from latin american countries there is a dearth of evidence from resource poor countries in africa in order to fill this gap we conducted a longitudinal randomized community control study of the pilot scts in mchinji malawi from march 2007 to april 2008 in this study we describe the impact of approximately us 14 per month on food security among recipient households compared to control households using indicators of food consumption and expenditures and dietary diversity we present compelling evidence whereby each of the tested outcomes yields large effect sizes that are highly statistically significant demonstrating a sizeable impact of cash transfers on food security and food diversity in rural malawi the scts appears to be an effective tool within the national social welfare policy for improving food security in the country s destitute households