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Showing posts from 2015

Why economic convergence matters in today’s globalized world

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In his fine book The Upside of Down: Catastrophe, Creativity and the Renewal of Civilization, professor Thomas Homer-Dixon refers to the projected divergence in average income per capita between the rich and poor countries.
Even if one assumes that the low income countries grow for the foreseeable future at much higher rates than the high income countries, because the current gap in per capita income is so large, the gap widens for many decades to come before convergence finally sets in well into the next century, if not later.
In other words, by 2015 the rich countries are so far ahead of the rest of the world that, except for a handful of countries with incomes very close to the income of the poorest rich country, no one else has a realistic chance of converging, as Taiwan (China) and South Korea did during the post-World War II period. This phenomenon, of widening income gaps in the future notwithstanding the presence of higher growth rates in the poor countries today is…

Equality of opportunity as an engine of prosperity

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We have learned much over the past several decades about the connection between gender inequality and economic growth, particularly when we talk about inequalities in education and employment. Inequalities in education, for instance, artificially reduce the pool of talent which societies can draw from; by excluding qualified girls from the educational stream and promoting less qualified boys, the average amount of human capital in a country will be reduced and this will have an adverse impact on economic performance. We also know that the promotion of female education leads to lower births per women, not only because educated women will have greater knowledge about family planning but also because education creates greater opportunities for women that may be more attractive than childbearing.
Lower fertility levels help reduce child mortality and expand the range of educational opportunities available to the next generation. All of these factors combine to boost economic…

Unpacking the drivers of inequality

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The relationship between growth and income inequality is more complex than the one between growth and poverty, and has been the subject of considerable study.

An early contribution in the 1950s by Nobel Prize-winning economist Simon Kuznets, for instance, noted that at least two forces tended to increase inequality over time. One was the concentration of savings in the upper-income groups; he observed that in the United States the wealthiest 5 percent of the population accounted for close to two-thirds of total savings.
A second factor, which has been a universal characteristic of development over the past century, was the gradual shift away from agriculture. Between 1991 and 2001, for instance, more than 8 million people left agriculture in India. Between 1965 and 2000 the share of the labor force employed in agriculture fell from 49 to 21 percent in Brazil, from 26 to 5 percent in Japan, from 55 to 11 percent in Korea, from 81 to 47 percent in China, and it fell to 2 percent i…