Treating Inequality with Redistribution: Is the Cure Worse than the Disease?


By Jonathan D. Ostry and Andrew Berg

(Version in EspañolFrançaisPortuguêsРусский中文)

Rising income inequality looms high on the global policy agenda, reflecting not only fears of its pernicious social and political effects, (including questions about the consistency of extreme inequality with democratic governance), but also the economic implications. While positive incentives are surely needed to reward work and innovation, excessive inequality is likely to undercut growth, for example by undermining access to health and education, causing investment-reducing political and economic instability, and thwarting the social consensus required to adjust in the face of major shocks.

Understandably, economists have been trying to understand better the links between rising inequality and the fragility of economic growth. Recent narratives include how inequality intensified the leverage and financial cycle, sowing the seeds of crisis; or how political-economy factors, especially the influence of the rich, allowed financial excess to balloon ahead of the crisis.

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Lagarde: Women Can Help Grow the World Economy


(Versions in Español and عربي)

Hot off the press: a new study out today from our economists pointing to the striking economic benefits that could come from increased female participation in the work force.

IMF Chief Christine Lagarde, calling attention to the findings of the paper, “Women, Work, and the Economy,” made the case for policymakers to shift into high gear and give women equal opportunities to participate in the work force.

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For Richer, Not Poorer: Energy Subsidies in India


By David Coady and Thomas Richardson

Many countries seek to protect poorer households by subsidizing the consumption of fuel products. However, recent IMF research shows that fuel subsidies are both inefficient and inequitable, including in India.

But what about India? Are fuel subsidies also anti-poor? Sadly, yes. A new IMF working paper  shows that India’s fuel subsidies are both fiscally costly and socially regressive.

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Economics – New Links for Students from the IMF


The IMF’s well written Finance & Development magazine has recently published two helpful online compilations of articles that may be useful to students and those interested in economic issues.    They are rich collections of material that are totally free!!
1. Back to Basics — explaining some fundamental concepts in Economics and Finance
2. People in Economics — a collection of profiles of leading economists and policymakers, including 10 Nobel Prize winners.
In addition,
  • listen to regular audio podcasts with leading experts on development issues around the world–or download from iTunes.
  • and get free a neat new ipad app for IMF news and data–it lets you chart and view global economic indicators and forecasts

Closer, Ever Closer


By Anoop Singh

(Version in 中文)

Here’s the good news: thanks to relatively strong fundamentals and good policies,  Asian economies have coped well with the global market turbulence of recent years. Now the bad: a major financial shock—say, of type ignited by the bankruptcy of U.S. investment bank Lehman Brothers in 2008—is likely to have a substantial impact on Asia.  The reason: Asia’s increasing financial interconnectedness.

Over the past two decades—in line with the region’s growing role in the global economy—Asia’s equity markets have become increasingly sensitive to global financial developments.   More specifically, we have discovered that equity returns in Asia generally now move in tandem with those in systemic economies.  (By systemic economies, we are talking here about those countries—such as the United States and the United Kingdom which are home to major, global, financial centers such as Wall Street and the City of London.)

How do we measure that degree of financial interconnectedness?  Or put another way, how do we measure the relationship—if any—between those Asian equity returns and the performance of systemic economies?

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