Rural Poverty Reduction and Economic Transformation in China: A Decomposition Approach

Rural poverty in China fell from 96 percent in 1980 to less than 1 percent of the population in 2019. Using PovcalNet data for China and a set of comparable countries, this paper estimates growth-poverty elasticities. It finds that China stands out for its record of sustained, fast growth, rather than because of an unusually high growth-poverty elasticity. In addition, changes in mean consumption, rather than changes in the distribution, drive poverty reduction. Furthermore, until 2010, changes in inequality attenuated the impact of growth on poverty. The paper also studies which channels mattered the most for rural poverty reduction by applying a decomposition framework to multiple rounds of Chinese Household Income Project surveys conducted in 1988, 1995, 2002, 2007, 2013, and 2018. The findings show that broad-based, labor-intensive growth in agriculture was initially the main driving force for rural poverty reduction, followed by the expansion of non-agriculture sectors. As the country’s poverty rate approached 10 percent by 2007, transfers from migrant workers and, later, public transfers became the major drivers of further rural poverty reduction. Throughout the period, the fall in the demographic dependency rate also played a significant role. As China’s living standards continue to rise, the official definition of poverty will have to adjust to the higher minimum. Continued structural transformation and the inclusive growth agenda retain crucial importance for sustained poverty reduction. (Stone Center on Socio-Economic Inequality Working Paper)

The Social Rights of Citizenship

This chapter reviews the welfare state literature which conceives of welfare state entitlements as ‘social rights of citizenship’, following the conceptualization of T. H. Marshall in his 1950 essay on citizenship. Beginning with Marshall’s influential essay, the first section of the chapter discusses how social rights of citizenship have been defined in the literature on comparative welfare states. Marshall argues that the defining feature of the social rights of citizenship is that they entail a claim for public transfers, goods, and services ‘which is not proportionate to the market value of the claimant’. Early quantitative studies of welfare state development measured welfare state effort with social expenditure, which was seen as a proxy for the variables of real interest, social rights, or welfare state redistribution. In the 1980s, ambitious efforts to measure social rights through time and across countries were initiated, though these measures did not find their way into the public domain until after 2000. These measures focus on rights to welfare state transfers and thus neglect services. The chapter ends with reviews of the literature on the causes of variations in social rights across countries and through time and on the outcomes of variations in social rights.

A Global Shock with Idiosyncratic Pains: State-Dependent Debt Limits for LATAM during the COVID-19 pandemic

Fiscal sustainability in five of the largest Latin American economies is examined before and after the COVID-19 pandemic. For this purpose, the DSGE model in Bi(2012) and Hürtgen (2020) is used to estimate the Fiscal Limits and Fiscal Spaces for Peru, Chile, Mexico, Colombia, and Brazil. These estimates advance the empirical literature for Latin America on fiscal sustainability by offering new calculations stemming from a structural framework with alluring novel features: government default on the intensive margin; dynamic Laffer curves; utility-based stochastic discount factor; and a Markov-Switching process for public transfers with an explosive regime. The most notable additions to the existing literature for Latin America are the estimations of entire distributions of public debt limits for various default probabilities and that said limits critically hinge on both current and future states. Results obtained indicate notorious contractions of Fiscal Spaces among all countries during the pandemic, but the sizes of these were very heterogeneous. Countries that in 2019 had positive spaces and got closer to negative spaces in 2020, have since seen deterioration of their sovereign debt ratings or outlooks. Colombia was the only country to lose its positive Fiscal Space and investment grade, thereby joining Brazil, the previously sole member of both groups

Resilience and Conflict: Evidence from Mali

Exploring the contextualized relationship between conflict and household resilience is a key element of policymaking under the Humanitarian and Development nexus. This paper provides new evidence on conflict and resilience from resilience-enhancing projects in Mali’s Central Sahel cross-border area. In particular, it explores the presence of determinants of resilience that explains conflict exposure; investigates the adoption of conflict-specific coping mechanisms and explores contextual specificities of local resilience capacity. The findings show that certain types of agricultural households have a higher probability of exposure to conflict, while no evidence of public transfers (e.g., cash transfers) increasing the level of exposure to conflicts is found. The results also show that there are elements which explain the adoption (or lack thereof) of coping mechanisms against conflict: social networks play an essential enabling role, as well as education, the level of food consumption, and to some extent, access to public transfers. Finally, the results suggest that female-headed households need more support in order to engage in coping strategies. This paper suggests that resilience-enhancing interventions and analysis require deeper knowledge of the context, paying special attention to the drivers of conflict and coping strategies adopted by households.

Private and public transfers: substitute or complement?

The paper analyzes the relationship between private and public social transfers in Russia. The research relies on the data from the Russian Longitudinal Monitoring Survey (RLMS-HSE) carried out by the Higher School of Economics in 1994–2018. The household is the unit of the analysis, the method of logistic regression is applied. The study has shown that when a household receives public social transfers, it is less likely to receive private transfers. So, the findings appear to bear out the hypothesis that public transfers crowd out private transfers in Russia.

Poverty and Sources of Income Support Among Older People With Disabilities and Out of Work: Comparison of Canada and the United Kingdom

The debate about extending working lives in response to population ageing often overlooks the lack of employment opportunity for older adults with disabilities. Without work, their living standards depend heavily on government transfers. This study contributes to the literature on health inequalities by analysing the sources of income and poverty outcomes for people aged 50 to 64 in two liberal democratic countries yet with contrasting disability benefit contexts – Canada and the United Kingdom. This choice of countries offers the opportunity to assess whether the design of benefit systems has led the most disadvantaged groups to fare differently between countries. Overall, disabled older persons without work faced a markedly higher risk of poverty in Canada than in the UK. Public transfers played a much greater role in the UK, accounting for two-thirds of household income among low-educated groups, compared with one-third in Canada. The average benefit amount received was similar in both countries, but the coverage of disabled people was much lower in Canada than in the UK, leading to a high poverty risk among disabled people out of work. Our findings highlight the importance of income support systems in preventing the widening of the poverty-disability gap at older ages.

Public Financing of Human Development in India: A Review

Role of public financing of human development (HD) is inevitable, especially for developing countries like India where access to resources and economic opportunities are not equitably distributed among people. Governments aim to achieve equity in distribution of resources through allocative and redistributive policies whereas macroeconomic stabilisation policies aim to achieve higher economic growth and stability in the price level. Expenditure policies of the governments envisage in delivering larger public goods and services to enable people to take part in economic activities by investing in human capital and infrastructure developments. Progressivity of the tax system helps in achieving equity by redistribution of resources among people. Being merit goods, expenditures on education, health, and poverty eradication make it a case for public investment which empowers people to improve human capital. The benefit of universal economic participation is expected to contribute in larger mobilisation of public resources over time. Lack of economic opportunities and earning a respectable income may increase dependence on public transfers which may reduce fiscal space of the governments to finance programmes to promote overall economic growth. The objective of this article is to review existing studies on public financing of HD in India and highlight emerging challenges.

Population Aging and the Three Demographic Dividends in Asia

The present study first examines the trends in age structural shifts in selected Asian economies over the period 1950–2050 and analyzes their impact on economic growth in terms of the first and second demographic dividends computed from the system of National Transfer Accounts. Then, using the National Transfer Accounts, we analyze the effect of the age structural shifts on the pattern of intergenerational transfers in Japan; the Republic of Korea; and Taipei,China. A brief comparison of the results reveals that, in the next few decades, the latter two are likely to follow in Japan's footsteps by increasing public transfers and asset reallocations, and by reducing familial transfers, particularly among older persons. Next, we consider a newly defined demographic dividend, which is generated through the use of the untapped work capacity of healthy older persons and to which we refer as “the silver” or “the third” demographic dividend. By drawing upon microlevel datasets obtained from Japan and Malaysia, we calculate the magnitude of the impact of that dividend on macroeconomic growth in each of the two economies, concluding that while in Japan the expected effect is substantial, in Malaysia it will take several decades before the country can enjoy comparable benefits.

Population Ageing and Financing Consumption of the Older Generation in the European Union

European countries are facing the challenge of population ageing, and social policies need to adjust to changing intergenerational balance. In this chapter, the most important challenges in the current intergenerational and intragenerational balance are assessed using the National Transfer Accounts approach. Financing the lifecycle deficit of older generations is mainly based on public transfers, while in the case of younger generations it is mainly financed from private transfers. The working-age generation faces a ‘triple burden’ as it finances the lifecycle deficit of older generations by paid taxes and the consumption of the young generation by private transfers. They also need to save more to be able to finance their future consumption to a larger extent from their savings. Recent policy developments show that the pressure of an increase of pension expenditure caused by demographic changes is offset by reducing pension transfers by changing benefit formulae or benefit indexation as well as increasing the effective pensionable age. The span of effective economic activity is relatively short, particularly for women. A gender gap in labor income is also linked to a gender gap in the pension income, which leads to further transfers between men and women at older ages. Income inequalities between older people increase following reforms of pension systems that tighten the link between lifetime earnings and pensions. Mortality differences interact with government programmes for the elderly (e.g., pension systems) and may reduce or even reverse the direction of income redistribution.

Bail-in and Bailout: Friends or Foes?

This paper analyzes the effects of bail-in and bailout policies on banks’ funding costs, incentives for loan monitoring, and financing capacity. In a model with moral hazard and two investment stages, a full bail-in turns out to be, ex post, the optimal policy to deal with a failing bank. Unlike a bailout, it allows the government to recapitalize the bank without resorting to distortionary taxes. As a consequence, however, investors expect bail-ins rather than bailouts. Ex ante, this raises banks’ cost of debt and depresses bankers’ incentives to monitor. When moral hazard is severe, this time inconsistency leads to a credit market collapse in which productive projects are not financed, unless the government precommits to an alternative resolution policy. The optimal policy is either a combination of bail-in and bailout—in which the government uses a minimal amount of public transfers to lower banks’ cost of debt—or liquidation, depending on the severity of moral hazard and the shadow cost of the partial bailout. This paper was accepted by Gustavo Manso, finance.