Is global inequality being underestimated?
Mumbai: The standard measures of inequality may be underestimating the true extent of global inequality, according to a new National Bureau of Economic Research (NBER) research paper by renowned development economist Martin Ravallion. Ravallion argues that an individual or household’s welfare depends not just on relative income differences within the country but also on the mean income level of the country. On average, a citizen of a wealthier country will have access to better public services, efficient institutions, and better opportunities. “To the extent that those living in richer countries are intrinsically better off there is even greater inequality in the world than suggested by current measures using survey-based own-incomes,” writes Ravallion.
The link between productivity and pay may not have broken down in the American economy but other factors may have acted to mute the effect of rising productivity on wage growth, according to a NBER research paper by Anna M. Stansbury of Harvard University and Lawrence H. Summers of Harvard Kennedy School of Government. The economists show that average labour productivity and compensation moved largely in tandem between 1948 and 1973, but the gap between the two widened during 1973-2016. In the latter period, productivity has grown relatively slowly, average pay slower still, and median pay barely at all. The authors argue that technological progress cannot explain the divergence between productivity and pay, hinting at other factors such as skills, globalization, and market power that could have dampened the effect of rising productivity on wage growth.
India’s construction boom between 1999-2000 and 2011-12 has largely been concentrated in the rural areas and is unlikely to have been a major driver of rural-urban migration, shows a recent Economic and Political Weekly (EPW) research paper by Kanika Mahajan of Ashoka University and R. Nagraj of the Indira Gandhi Institute of Development Research, Mumbai. The authors use data from the National Sample Survey Office (NSSO) to show that most of the jobs generated by the construction boom have been in rural areas, and driven largely by recovery in rural incomes and wealth over this period.
The Aadhaar-based biometric authentication system for the public distribution scheme (PDS) seems to have revived corruption instead of eliminating it in rural Jharkhand, shows an EPW research paper by Jean Dreze of Ranchi University and co-authors. The paper, based on a survey conducted in June 2017 in 32 villages in Jharkhand, shows that a shift to biometric authentication from the ‘register’ system has added to the complexities of both distributing and procuring foodgrains under the PDS scheme, without commensurate gains for beneficiaries. Limited battery life of point-of-sale machines, poor or no electricity connections, inability of the machine to recognize fingerprints, etc. are a few of the many challenges consumers face in procuring their share of ration at PDS outlets. Biometric failures were found to be especially common among elderly and manual labourers – two groups particularly vulnerable to food insecurity.
While the under-five mortality rate has declined in India since the turn of the twenty-first century, the rate of improvement in the mortality rates in the first month of life has been slow, a blog-post by Diane Coffey of the University of Texas points out. Such deaths account for 60% of the deaths among under-five children. Coffey argues that low-birth weight infants are at the greatest risk of early death, and recommends nutritional interventions to address the problem.
Economics Digest runs weekly, and features interesting reads from the world of economics