The effects of bond ratings on income inequality in the developing world

2020 ◽  
pp. 1-31
Author(s):  
Glen Biglaiser ◽  
Ronald McGauvran
Keyword(s):  
Developing Countries ◽  
Interest Rate ◽  
Income Inequality ◽  
Credit Rating ◽  
Developing World ◽  
Bond Ratings ◽  
Monetary Policies ◽  
Neoliberal Reforms ◽  
Interest Rate Spreads ◽  
The Rich

Abstract Although the effects of globalization on income inequality has received much attention, missing from the discussion is the role played by credit rating agencies (CRAs) on income inequality. Using a sample of seventy developing countries from 1990–2015, we find that bond ratings have significant, yet indirect, effects on income inequality. We see that interest rate spreads, and to a lesser degree tax, labor, and monetary policies, mediate the relationship between ratings and income inequality. Specifically, developing countries receiving bond downgrades observe a rise in interest rate spreads. Countries with higher interest rate spreads tend to have less available credit, which reduces output and production, promoting surplus labor and its consequences for those at the bottom of the income distribution. Bond downgrades also compel developing countries to pursue neoliberal reforms, endorsed by the CRAs, in an attempt to lift their ratings. The effects of tax, labor, and monetary policies, in particular, appear to enlarge disparities between the rich and the poor. Our research helps to identify the mechanism by which CRAs and globalization, more generally, impact wealth disparities in the developing world.

The effects of debt restructurings on income inequality in the developing world

2021 ◽  
pp. 135406612110014
Author(s):  
Glen Biglaiser ◽  
Ronald J. McGauvran
Keyword(s):  
Developing Countries ◽  
Panel Data ◽  
Income Inequality ◽  
Income Distribution ◽  
Government Spending ◽  
Tax Reform ◽  
Social Spending ◽  
The Poor ◽  
The Rich ◽  
The Impact

Developing countries, saddled with debts, often prefer investors absorb losses through debt restructurings. By not making full repayments, debtor governments could increase social spending, serving poorer constituents, and, in turn, lowering income inequality. Alternatively, debtor governments could reduce taxes and cut government spending, bolstering the assets of the rich at the expense of the poor. Using panel data for 71 developing countries from 1986 to 2016, we assess the effects of debt restructurings on societal income distribution. Specifically, we study the impact of debt restructurings on social spending, tax reform, and income inequality. We find that countries receiving debt restructurings tend to use their newly acquired economic flexibility to reduce taxes and lower social spending, worsening income inequality. The results are also robust to different model specifications. Our study contributes to the globalization and the poor debate, suggesting the economic harm caused to the less well-off following debt restructurings.

Sovereign Bond Ratings and the Democratic Advantage

2008 ◽  
Vol 41 (8) ◽  
pp. 1092-1116 ◽  
Author(s):  
Glen Biglaiser ◽  
Brian Hicks ◽  
Caitlin Huggins
Keyword(s):  
Developing Countries ◽  
Political Institutions ◽  
Private Equity ◽  
Credit Rating ◽  
Bond Ratings ◽  
Heckman Model ◽  
Rating Agencies ◽  
Portfolio Flows ◽  
Sovereign Bond ◽  
Democratic Advantage

As developing countries expose portfolio investors to potential high risk, it is expected that investors will follow the advice of credit rating agencies (CRAs) before sending capital abroad. Controlling for political and economic explanations in the literature, the authors use panel data for 50 developing countries from 1987 to 2003 to determine if changes in CRA ratings affect portfolio flows. Using a two-stage Heckman model, they find that countries that are under newer political institutions and facing economic challenges are more likely to be selected by portfolio investors because they offer risk premia, but that CRA ratings and democracy have significant positive signaling effects on the countries that receive the largest private equity inflows. In fact, democracy and bond ratings are the most important for the poorest developing countries. The results suggest the significance of CRA ratings for equity investors and contribute a revision for the democratic advantage debate.

Income Inequality within Countries

2021 ◽  
pp. 91-111
Author(s):  
Andy Sumner
Keyword(s):  
Developing Countries ◽  
Economic Development ◽  
Income Inequality ◽  
Empirical Evidence ◽  
Developing World ◽  
National Income ◽  
Global Inequality ◽  
Seminal Work ◽  
Great Transformation ◽  
The Impact

This chapter addresses the within-country component of global inequality and the impact of deindustrialization on national income inequality. The chapter focuses on the fourth great transformation outlined, specifically the shift to a form of immiserizing growth. This chapter revisits Kuznets’ seminal work and asks what trend might be expected for national inequality during deindustrialization. The chapter makes estimates of the empirical evidence on deindustrialization, tertiarization, and national income inequality in developing countries. The accompanying myth—that if developing countries integrate more and more into GVC world, the process will lead to broad-based economic development—is critiqued. A theoretical exposition to explain the connection between deindustrialization, tertiarization, and rising national income inequality in the developing world is given.

The Importance of Being Defunct (Presidential Address)

1985 ◽  
Vol 24 (3-4) ◽  
pp. 211-234
Author(s):  
Syed Nawab Haider Naqvi
Keyword(s):  
Developing Countries ◽  
Development Economics ◽  
Developing World ◽  
Empirical Studies ◽  
Presidential Address ◽  
Great Expectations ◽  
Founding Fathers

For development economists these arc the days of great expectations. Development economics as a discipline, born only three decades ago, has come to stay, notwithstanding the threats to its existence issued openly by such friends as Schultz [63], Bauer [2], Little [44], and Lal [39]. New theoretical constructs have been devised and novel empirical studies done to comprehend better the forces of change in developing countries. While of late there may not have been great festivity in the realm of ideas, the force of circumstances has widened the problem canvas of development economics and has opened up new vistas for economists to explore- much beyond the expectations of its founding fathers. Also notwithstanding the great diversity in the experience of individual countries, development economists may legitimately draw some comfort from the thought that their ideas have changed the developing world for the better.

Macroeconomic Shocks and Unconventional Monetary Policy

2019 ◽  
Keyword(s):  
Interest Rate ◽  
Financial Crisis ◽  
Emerging Markets ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Developing Economies ◽  
Spillover Effects ◽  
Macroeconomic Shocks ◽  
Monetary Policies ◽  
Developed Economies

Barely two decades after the Asian financial crisis Asia was suddenly confronted with multiple challenges originating outside the region: the 2008 global financial crisis, the European debt crisis, and, finally developed economies’ implementation of unconventional monetary policies. Especially the implementation of quantitative easing (QE), ultra-low interest rate policies, and negative interest rate policies by a number of large central banks has given rise to concerns over financial stability and international capital flows. One of the regions most profoundly affected by the crisis was Asia due to its high dependence on international trade and international financial linkages. The objective of this book is to explain how macroeconomic shocks stemming from the global financial crisis and recent unconventional monetary policies in developed economies have affected macroeconomic and financial stability in emerging markets, with a particular focus on Asia. In particular, the book covers the following thematic areas: (i) the spillover effects of macroeconomic shocks on financial markets and flows in emerging economies; (ii) the impact of recent macroeconomic shocks on real economies in emerging markets; and (iii) key challenges for the monetary, exchange rate, trade, and macroprudential policies of developing economies, especially Asian economies, and suggestions and recommendations to increase resiliency against external shocks.

scholarly journals Globalization and educational inequality during the 18th to 20th centuries: Latin America in global comparison

2010 ◽  
Vol 28 (2) ◽  
pp. 279-305 ◽  
Author(s):  
Joerg Baten ◽  
Christina Mumme
Keyword(s):  
Developing Countries ◽  
Latin America ◽  
Strong Evidence ◽  
Educational Inequality ◽  
Gdp Per Capita ◽  
Positive Effects ◽  
Global Comparison ◽  
Per Capita ◽  
The Rich

AbstractThis paper explores the inequality of numeracy and education by studying school years and numeracy of the rich and poor, as well as of tall and short individuals. To estimate numeracy, the age-heaping method is used for the 18th to early 20th centuries. Testing the hypothesis that globalization might have increased the inequality of education, we find evidence that 19th century globalization actually increased inequality in Latin America, but 20th century globalization had positive effects by reducing educational inequality in a broader sample of developing countries. Moreover, we find strong evidence for Kuznets’s inverted U hypothesis, that is, rising educational inequality with GDP per capita in the period until 1913 and the opposite after 1945.

scholarly journals Multicentre methodological study to create a publicly available score of hospital financial standing in the USA

BMJ Open ◽  
2021 ◽  
Vol 11 (7) ◽  
pp. e046500
Author(s):  
Radoslav Zinoviev ◽  
Harlan M Krumholz ◽  
Richard Ciccarone ◽  
Rick Antle ◽  
Howard P Forman
Keyword(s):  
Gold Standard ◽  
Financial Stability ◽  
Credit Rating ◽  
Financial Data ◽  
Composite Score ◽  
Methodological Study ◽  
Bond Ratings ◽  
Hospital Operations ◽  
Initial Dataset ◽  
The Usa

ObjectivesTo create a straightforward scoring procedure based on widely available, inexpensive financial data that provides an assessment of the financial health of a hospital.DesignMethodological study.SettingMulticentre study.ParticipantsAll hospitals and health systems reporting the required financial metrics in the USA in 2017 were included for a total of 1075 participants.InterventionsWe examined a list of 232 hospital financial indicators and used existing models and financial literature to select 30 metrics that sufficiently describe hospital operations. In a set of hospital financial data from 2017, we used principal coordinate analysis to assess collinearity among variables and eliminated redundant variables. We isolated 10 unique variables, each assigned a weight equal to the share of its coefficient in a regression onto Moody’s Credit Rating, our predefined gold standard. The sum of weighted variables is a single composite score named the Yale Hospital Financial Score (YHFS).Primary outcome measuresAbility to reproduce both financial trends from a ‘gold-standard’ metric and known associations with non-fiscal data.ResultsThe validity of the YHFS was evaluated by: (1) cross-validating it with previously excluded data; (2) comparing it to existing models and (3) replicating known associations with non-fiscal data. Ten per cent of the initial dataset had been reserved for validation and was not used in creating the model; the YHFS predicts 96.7% of the variation in this reserved sample, demonstrating reproducibility. The YHFS predicts 90.5% and 88.8% of the variation in Moody’s and Standard and Poor’s bond ratings, respectively, supporting its validity. As expected, larger hospitals had higher YHFS scores whereas a greater share of Medicare discharges correlated with lower YHFS scores.ConclusionsWe created a reliable and publicly available composite score of hospital financial stability.

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