Battle against cyber crimes cannot be left to markets, says IMF
Digitization has increased risks of cyber crimes such as data thefts and frauds. But financial institutions are ill-prepared to deal with these, according to a recent IMF paper. This is because the market for cyber security and insurance might fail to provide a “socially optimal level” of protection against such risks. Individual risk-assessment at levels of banks etc. can ignore its systemic nature. Financial institutions might be wary of revealing and sharing information about cyber security breaches due to concerns of loss in reputation and higher funding/insurance costs. Cyber crimes can snowball into a global contagion. But reluctance to share sensitive data hampers international cooperation. The IMF paper calls for greater investment in cyber security and coordination among institutions and countries to tackle cyber risks.
Wealth-income ratio for Chinese households is three times more than in the US. But there are qualitative differences in their financial behaviour. US households are more likely to invest in stocks. The Chinese invest more in housing. A paper by Russell Cooper and Guozhong Zhu, professors with the Pennsylvania State University and University of Alberta, argues that social preferences and institutional factors related to regime-change in China explain these differences. Income uncertainty associated with labour reforms and weak social insurance has made the Chinese more risk-averse. They are less likely to consume more in anticipation of future incomes. The Chinese society also has a much lower minimum consumption floor than the US. High return on housing investment after China’s housing reforms around 2000 has increased this sector’s attractiveness, but lowered stock market participation. Stock market participation in both countries increases with higher education levels though.
Also Read: Household Finance in China
Measuring global poverty based on a uniform poverty line for all countries, expressed in ‘international dollars’, might underestimate its true extent. This is because such an approach uses the same yardstick to measure poverty in both rich and poor countries. Ideally, the threshold to consider somebody as above-poverty level should be higher in a rich country because overall welfare often depends on one’s relative standing in society. Hence, Martin Ravallion and Shaohua Chen, economists who have been associated with the World Bank, calculate ‘upper bound’ estimates of such ‘welfare-consistent’ global poverty across years, making use of poverty lines in different countries. The lower bound is provided by the traditional estimate of global poverty based on World Bank’s $1.90 a day international poverty line. Both measures indicate falling global poverty incidence, but more slowly for the upper bound. Poverty is higher in the developing world compared to the developed world but it is falling faster in the developing world.
Also Read: Welfare-Consistent Global Poverty Measures
Is there a racial dimension to increasing inequality in the US? A paper by Randall Akee, an assistant professor at University of California Los Angeles and others has looked at tax return data between 2000 and 2014 to answer this question. The paper shows that whites continue to be ahead of all race groups except Asians in the US. The rate of income growth for the top ten percent exceeds that of the person at the middle of the distribution, for all race groups. Income inequality worsened within each group between 2000 and 2014, driven by inequality among the richer fifty percent. On the other hand, income inequality among the bottom fifty percent changed little for all race groups except whites. There, a steady decrease in income level of the bottom ten percent increased inequality. Meanwhile, income mobility decreased for all race groups after the economic recession. The authors use their findings to argue that race and ethnicity continue to be important determinant of income in the US.
Quotas for women at local-level government in India led to more women contesting state and parliamentary elections, although not necessarily converting them into victories, according to Stephen D. O’Connell, researcher at the Massachusetts Institute of Technology. India in 1993 mandated that one-third of seats at each governance level--village, block and district-- be reserved for women candidates. Districts with more years of quota policy at the local level witnessed increased candidacy of women in state assembly elections from 2004 to 2007 and the parliamentary elections of 2009. However, win percentage of these women was low. This could be attributed to the fact that most of them contested as independent candidates, thus lacking the resource mobilization that is often needed to secure victories in elections.
Economics Digest runs weekly, and features interesting reads from the world of economics.
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