A theory of employment guarantees: Contestability,credibility and distributional concerns

Both raw intuition and past experience suggest that the success of an employment guarantee scheme (EGS) in safeguarding the welfare of the poor depends both on the wage it promises, and the ease with which any worker can gain access. An EGS is thus at once a wage guarantee and a rationing device. We chart the positive and normative limits of such an EGS as an efficiency improving and poverty alleviating policy reform in a canonical labor market setting. At its core, an EGS provides an aggregate, not just EGS, employment target. Given the target, the EGS wage and access can be fine-tuned to deliver outcomes ranging from a contestable labor market to a simple universal unemployment benefit. The credibility of any such target, however, is shown to be triggered endogenously by a host of factors: the distributional concerns of the planner, private sector productivity, the prevalence of market power and the need for public works. Paradoxically, the outcome with a planner who cares only about efficiency can be less efficient than the outcome with a planner whose social welfare function also gives weight to poverty!     

EX-ANTE SIMULATIONS OF DIRECT AND INDIRECT EFFECTS OF WELFARE REFORMS

This paper estimates an ex-ante structural model that incorporates behavioral labor responses to analyze the distributive impacts of a long proposed reform in Ecuador: the shift from regressive consumer gas subsidies to the progressive Human Development Bonus (HDB). Even the most radical reform options may not have the expected sizeable distributive gains. This is the case even after the targeting instrument, SelBen, substantially corrects the current targeting deficiencies of the HDB. Poverty reduction is maximized (reduing poverty by about five percentage points) when the targeting instrument redirects resources to households close to the pre-reform poverty line. Most of this estimated impact accrues from direct effects with a minimal contribution from indirect effects. Labor-driven indirect effects are multiple and complex, tending to cancel out one another.     

Picking the Poor: Indicators for Geographic Targeting in Peru

Geographic targeting is perhaps the most popular mechanism used to direct social programs to the poor in Latin America. This paper empirically compares geographic targeting indicators available in Peru. To this effect, I combine household–level information from the 1997 Peru Living Standards Measurement Survey (LSMS) and district–level information from the 1993 Peru Population and Housing Census. I then conduct a series of simulations which estimate leakage rates, concentration curves, the impact of transfers on poverty as measured by the headcount index, poverty gap and P2 measures of the FGT family, and non–parametric (kernel) densities when transfers are based on alternative indicators. I conclude that there is substantial potential for geographic targeting in Peru. However, the differences in outcomes across geographic targeting indicators are small, and are not statistically significant. These results are in keeping with earlier work which suggests that (among reasonable alternatives) the choice of geographic targeting indicator does not have an important bearing on poverty outcomes, and are at odds with more recent research which stresses the advantage of poverty maps which "impute" consumption or income.     

A preliminary theoretical examination of the targeted public distribution system in India

A theoretical model of targeting in the public distribution system is set out. In any system of targeting there could be inclusion and exclusion errors. These errors could be reduced by search by the state. The state aims to minimise the costs of food administration subject to keeping the magnitude of the exclusion error bounded. Targeting involves a consideration of the objective poverty level, the official poverty level and the targeted poverty level by the state. The targeted poverty level could be less than the official poverty level if the extent of search is not adequate. The objective poverty level is an increasing function of the above poverty line issue price of food due to exclusion errors, a decreasing function of the procurement price of food and by definition the below poverty line issue price of food. The instruments in the hands of the state are the official poverty level, the above poverty line issue price for food, the procurement price of food and the extent of search. The comparative static implications of the model are set out.     

Motivation for bilateral aid allocation: Altruism or trade benefits

This paper argues that OECD countries allocate more aid to recipient nations who import goods in which donor nations have a comparative advantage in production. The estimates indicate that a substantially larger amount of aid is provided to recipients who import capital goods, while imports by other category groups have no significant effects. Given that developed donor nations are major producers and exporters of capital goods, this result at least partially supports their trade benefits motive. Donors also appear to be more concerned about alleviating physical miseries (infant mortality) and rewarding good human rights conditions, but less towards reducing economic hardships (poverty). Moreover, the usual political and strategic considerations of donors continue to be the major determinants of aid allocation even in the Post Cold War era.     

Dependency traps in self‐targeting food aid programs

We present an economy of farmers where food aid is warranted due to poverty traps triggered by nonconvex production sets. We model a food‐aid intervention as a dynamic game between a food‐aid manager and the farmers in a context of asymmetrical information. The food‐aid manager is motivated by a relief objective and targets farmers suffering the poverty trap. The food‐aid manager uses a self‐targeting mechanism by providing the aid through a food wage in exchange for participation in the intervention's activities. Guided by the relief objective and targeting constraint, he fixes the food wage equal to the reservation wage of the farmers not suffering the poverty trap. Dependency traps will then happen every time there is a considerable technological and nutritional gap between farmers who are in and out of the poverty trap. When there is a gap, poor farmers earn more working for the reservation wage of the well‐off farmers than by working in their own farm. Dependency can be overcome only if the food‐aid program allows farmers to upgrade their productive technologies and catch up with those farmers who are out of the poverty trap.     

Option Values, Switches, and Wages: An Analysis of the Employment Guarantee Scheme in India

Consistent with real option theory, the authors argue that the value of the Employment Guarantee Scheme (EGS) in rural India and its impact on workers' behavior does not depend so much on its income supplementation as on enlargement of opportunities in the uncertain local labor market. The choice between the EGS and other activities is modeled in a dynamic optimization framework, taking into account a fixed wage rate and certainty of employment under the EGS and a stochastic wage rate under other activities. Specifically, volatility of wages in the rural labor markets has important implications for switches into the EGS and for concomitant welfare effects. Under such conditions, the higher the EGS wage, the greater is its attractiveness to relatively skilled and affluent workers, and for those already in it to continue. These and related predictions of the model are validated by panel data estimation.     

Poverty functions and the aged population

This article examines trends in poverty among the elderly in the United States from two perspectives. "First, we are interested in changes that took place in the magnitude, characteristics and incidence of poverty within this sector, as a result of the functioning of the economy as well as the poverty programme during the past decade. Our second primary objective is to present analytical models of the severity of poverty and use these models to describe techniques that might be employed in evaluating ways of alleviating poverty in one category of the aged poor where it seems most acute and most intractable, i.e. aged women living alone."     

中国城镇家庭能源贫困评估*——基于微观调查数据的研究

我国扶贫工作重点已进入新阶段,从消除绝对贫困向缓解发展不平衡、不充分的相对贫困转变,从解决收入贫困向解决多维贫困转变,从重点解决农村贫困问题向统筹城乡扶贫转变。能源是人民生活质量的重要指标,能有效反映福利水平。了解我国城镇家庭能源消费的基本特征、准确测度能源贫困水平与分布,有助于为今后扶贫工作提供资料基础和科学管理依据。本文构建消费者能源消费决策分析框架,并运用第一次中国家庭能源消费调查数据,考察居民收入与能源消费之间的关系,并对中国城镇家庭能源贫困状况进行测度。研究发现,居民收入与能源消费之间存在S型非线性关系,能源价格、家庭特征、地域特征等因素在能源消费决策中都发挥重要影响。我国城镇家庭相对能源贫困较为严重,主要表现为能源可支付性问题。能源贫困率在20%左右,其中电力贫困程度更为严重,超过25%。家庭收入增长、户主受教育程度提高、城市电力基础设施的普及、城市环境规制水平的提升会显著降低城镇家庭陷入能源贫困的可能性,而电力价格上涨会显著增加城镇家庭陷入能源贫困的概率。     

Poverty alleviation through geographic targeting: How much does disaggregation help?

In this paper, we employ recently completed “poverty maps” for three countries as tools for an ex ante evaluation of the distributional incidence of geographic targeting of public resources. We simulate the impact on poverty of transferring an exogenously given budget to geographically defined sub-groups of the population according to their relative poverty status. We find large gains from targeting smaller administrative units, such as districts or villages. However, these gains are still far from the poverty reduction that would be possible had the planners had access to information on household level income or consumption. Our results indicate that a useful way forward might be to combine fine geographic targeting using a poverty map with within-community targeting mechanisms.     

Health care spending and hidden poverty in India

India has a high level of out-of-pocket (OOP) health care spending, and lacks well developed health insurance markets. As a result, official measures of poverty and inequality that treat medical spending symmetrically with consumption goods can be misleading. We argue that OOP medical costs should be treated as necessary expenses for the treatment of illness, not as part of consumption. Adopting this perspective, we construct poverty and inequality measures for India that account for impoverishment induced by OOP medical costs. For 2011/12 we estimate that 4.1% of the population, or 50 million people, are in a state of “hidden poverty” due to medical expenses (based on official poverty lines). Furthermore, while poverty in India fell substantially from 1999/00 to 2011/12, the fraction of the remaining poverty that is due to medical costs has risen substantially. Economic growth appears less “pro-poor” if one accounts for OOP medical costs, especially since 2004/05, and especially in rural areas. Finally, we look beyond poverty rates to show how OOP health costs affect the entire shape of the consumption distribution.     

秦巴山区贫困与反贫困问题研究：以陕西省柞水县为例

本文以陕西省柞水县为例,分析了秦巴山区贫困的原因,提出了反贫困基本思路及政策建议。     

A SYNTHESIS OF POVERTY LINE DEFINITIONS*

A fundamental point of discussion in poverty research is whether poverty is an absolute or a relative concept. If poverty is seen to be a situation of absolute deprivation, a poverty line will usually be defined to be independent of the general style of living in society. If poverty is considered to be a situation of relative deprivation, a poverty line will be defined in relation to the general style of living in society. The choice for one of these two approaches has important consequences for social policy, as absolute poverty may be reduced by economic growth, while relative poverty will only decrease when income inequality decreases. This paper suggests a poverty line definition that is not a priori meant to be either absolute or relative, but depends on the perception of poverty in society. If the poverty line is higher in countries with higher median income (as an indicator of “general style of living”) the poverty line is said to be relative; if the poverty line does not vary with median income, it is said to be absolute. The poverty line definition suggested appears to be a generalization of almost all well-known poverty line definitions. Poverty lines thus defined are estimated for eight European countries on the basis of a 1979 survey. The resulting lines appear to have an elasticity with respect to median income of 0.51, and hence can be said to be halfway on the scale between absolute and relative.     

Monetary Policy Transparency in the UK: The Impact of Independence and Inflation Targeting

There is a widespread belief that the transparency of UK monetary policy has increased substantially as a result of the introduction of inflation targeting in 1992 and a number of procedural and institutional reforms which accompanied and followed it. Here, money market responses (and other data) are used to test the possibility that improved anticipation of policy moves may be the result of developments other than the institutional reforms popularly cited. We find overwhelming evidence that the switch to inflation targeting itself significantly reduced monetary policy surprises, while subsequent reforms have contributed little. Where we advance substantially on earlier work is to look at the cross‐sectional dispersion of agents’ anticipation. If the benefit of transparency is the elimination of policy surprise, there is little benefit if the averagely correct anticipations of agents conceal a wide dispersion of view.     

Public policy and rural poverty : A system dynamics analysis of a social change effort in Pakistan

This paper attempts to explain why public policies that were expected to alleviate rural poverty in Pakistan have not worked. The analysis is based on a system dynamics model that incorporates the income distribution processes of a typical developing country agrarian economy consisting of a capitalist and self-employed sector. Only the economic factors arising out of the rational decisions of the two sectors regarding production and disbursement of income have been taken into account. These factors are considered adequate for explaining the persistence of rural poverty, although the role of social and political factors is acknowledged.The study suggests that the absence of an economic force that should encourage land ownership by its cultivators is a key factor responsible for the poor economic condition of the working rural household that form the majority of the rural population. Land is easily separated from cultivators and is concentrated among the few capitalist households. This concentration significantly reduces income in self-employment and thus leaves the cultivators with very little bargaining power for negotiating compensation for thier labor. Thus development policies striving to increase productivity may only serve to increase the claim to income of the few capitalist households, leaving incomes of the majority of the households unchanged while also assuring continuation of low worker compensation.The study indicates that a development policy for alleviating poverty should simultaneously incorporate fiscal instruments to encourage transfer of land ownership to its cultivators and measures that help increase the productivity of land.     

建国以来我国农村扶贫开发的历史回顾与现实启示

新中国成立后,根据不同时期农村贫困状况的不同特点,中国共产党采取了相应的扶贫政策和措施,从小规模的救济式扶贫,到以体制改革为主导的扶贫;从以"输血"为主的扶贫到以"造血"为主的扶贫再到综合性扶贫开发,取得了重要成效,并积累了许多宝贵经验,为新形势下进一步开展农村扶贫开发工作提供了重要启示。     

Fiscal policy,growth, income distribution and sociopolitical instability

This paper identifies the fiscal instruments that governments can use to promote economic growth when sociopolitical instability (SPI) is present. We show that fiscal policy that takes into account income distribution and SPI transforms a neoclassical growth model into one with both endogenous growth and a poverty trap. Under these circumstances, the growth rate of the economy depends upon SPI, fiscal policy and income distribution. The baseline level of SPI determines an economy's ability to grow. If SPI is high, the economy remains in a poverty trap even if fiscal policy instruments are set appropriately.     

Shocks, Policy Reforms and Pro-Poor Growth in Bolivia: A Simulation Analysis

This paper analyzes how major external shocks and policy reforms affect Bolivia’s ability to achieve pro‐poor growth. Employing a recursive‐dynamic CGE model, it considers three different scenarios: an optimistic baseline scenario; a more realistic scenario that accounts for two important negative external shocks (declining capital inflows and El Niño); and a scenario that captures the combined effect of the shocks and two major reform projects (development of the gas sector and deregulation of the urban labor market). It turns out that the shocks are likely to impair Bolivia’s medium‐term development prospects, leading to marked increases in both urban and rural poverty. If the reform projects were implemented, the poverty increase caused by the shocks would be more than offset for urban households, but reinforced for rural households.     

Poverty and the management of natural resources: A model of shifting cultivation

It is frequently asserted in the environment/development literature that severe poverty causes the neglect of worthwhile investments, resulting in deforestation and other resource degradation. While microeconomic theory does suggest a relationship between poverty and the evaluation of investments, the environmental impact is not so simple. This paper develops a dynamic theory of “shifting cultivation,” with special attention to an environmental impact variable: the length of time a given field is cultivated before a shift to the next. The model indicates that poverty reduction will lead in some ways to accelerated extraction of a natural resource, but also to a longer extraction period. The results therefore provide support for claims of an indirect environmental benefit from the primary goal of alleviating rural poverty. The impact of discount rates, prices, and other parameters are also explored.     

Estimating poverty persistence in Britain

This article uses longitudinal data from the BHPS (1991–2006) to document low-income dynamics and persistence for individuals living in Britain. Poverty exit and re-entry rates are estimated, and the resulting distribution of time spent in poverty is calculated, both in single and in multiple-spell frameworks. Poverty persistence predictions are also produced for various subgroups of the populations. In order to do so, I estimate a multiple-spell model of transitions in and out of poverty, controlling for observed and correlated unobserved individual heterogeneity and for a potential initial condition problem. Components-of-variance models are also used to predict the number of years in poverty for the targeted groups. The two alternative modeling approaches are shown to produce a consistent picture of poverty persistence.