Macroeconomic Adjustment and the Poor: Analytical Issues and Cross‐Country Evidence

Abstract.  This paper studies the links between macroeconomic adjustment and poverty. The first part summarizes some of the recent evidence on poverty in the developing world. The second reviews the various channels through which macroeconomic policies affect the poor, whereas the third is devoted to the specific role of the labor market. It presents an analytical framework that captures some of the main features of the urban labor market in developing countries and studies the effects of fiscal adjustment on wages, employment, and poverty. The fourth part presents cross‐country regressions linking various macroeconomic and structural variables to poverty. Higher levels and growth rates of per capita income, higher rates of real exchange rate depreciation, better health conditions, and a greater degree of commercial openness lower poverty, whereas inflation, greater income inequality, and macroeconomic volatility tend to increase it. Moreover, the impact of growth on poverty appears to be asymmetric; it seems to result from a significant relationship between episodes of increasing poverty and negative growth rates.     

Performance, seniority, and wages: formal salary systems and individual earnings profiles

This paper replicates studies by Medoff and Abraham [Quart. J. Eco. 95 1980 703; J. Hum. Res. 16 1981 186] and Flabbi and Ichino [Lab. Eco. 8 2001 359] using personnel data from the Dutch national aircraft manufacturer Fokker. It shows how a formal salary system, as is widely used by large firms, brings about that seniority-wage profiles are largely independent of controls for reported performance in cross-sectional wage regressions even though supervisors' evaluations shape life-cycle earnings profiles. Performance ratings determine how fast a worker climbs the firm's career and wage ladder. The paper also reveals that real wage growth depends on the employer's prosperity, and it demonstrates that formal salary systems cause serial correlation in wage growth and “Green Card” effects.     

Measuring digitization: A growth and welfare multiplier

Digitization encapsulates the social transformation triggered by the mass adoption of digital technologies that generate, process and transfer information. The digitization index introduces a global measure of national performance reflecting ubiquity, affordability, reliability, speed, usability and skills. Output and welfare rise with the index while manifesting increasing returns to scale some implications for ICT public policy are drawn from these findings.     

Spatial Cournot competition and economic welfare: a note

We investigated welfare implications in location-quantity models in a symmetric linear city. We found that when firms are not agglomerated in equilibrium, increasing the distance between firms raises (reduces) producer surplus and social welfare (consumer surplus). Moreover, central agglomeration is always optimal for consumers among symmetric locations, but not necessarily for producers. Central agglomeration can be inefficient even if it is the unique equilibrium outcome. In short, the firms are more likely to agglomerate or locate closer than what welfare maximizers would dictate, whereas they locate farther apart than what consumer surplus maximizers would recommend.     

Job hopping, earnings dynamics, and industrial agglomeration in the software publishing industry

This paper investigates the implications of industrial clustering for labor mobility and earnings dynamics in one large and increasingly important high-technology sector. Taking advantage of longitudinal employee-employer matched data, I exploit establishment-level variation in agglomeration to explore how clustering in the software publishing industry affects labor market outcomes. The results show that clustering makes it easier for workers to job hop within the sector. Higher earnings levels in more agglomerated areas are partly attributable to sorting across locations among workers and firms in the industry on the basis of observable and unobservable characteristics. Controlling for this heterogeneity, workers in clusters have relatively steep earnings-tenure profiles, accepting lower wages early in their careers in exchange for stronger earnings growth and higher wages later. These findings are consistent with theoretical models in which agglomeration improves labor market coordination and facilitates greater learning and human capital formation.     

Cross-sectional earnings risk and occupational sorting: The role of risk attitudes

This paper investigates to what extent individuals' risk preferences are correlated with the cross-sectional earnings risk of their occupation. We exploit data from the German Socio-Economic Panel, which contains a direct survey question about willingness to take risks that has been shown to be a behaviorally valid measure of risk aversion. As a measure of earnings risk, we use the cross-sectional variation in earnings that is left unexplained by human capital variables in Mincerian wage regressions. Our evidence shows that individuals with low willingness to take risks are more likely to work in occupations with low earnings risk. This pattern is found regardless of the level of occupation categories, region, gender and labor market experience.     

Anticipation,learning and welfare: the case of distortionary taxation

We study the impact of anticipated fiscal policy changes in a Ramsey economy where agents form long-horizon expectations using adaptive learning. We extend the existing framework by introducing distortionary taxes as well as elastic labor supply, which makes agents’ decisions non-predetermined but more realistic. We detect that the dynamic responses to anticipated tax changes under learning have oscillatory behavior that can be interpreted as self-fulfilling waves of optimism and pessimism emerging from systematic forecast errors. Moreover, we demonstrate that these waves can have important implications for the welfare consequences of fiscal reforms.     

Sharing risk within and across countries: the role of labor market institutions

This paper studies the effect of labor market institutions on within- and cross-country risk sharing, using a model of international trade in risky assets modified to include a subset of agents, labor-owners who do not access financial markets, and employment security provisions. Labor market, institutions, by promoting within-country risk-shifting arrangements between agents with or without, access to financial markets, reduce the fluctuations of non-tradable labor incomes and amplify the, fluctuations of capital incomes. Capital flows become more volatile across countries, and if the, configuration of labor markets differs across countries, capital-owners bear the burden of systematic, undiversifiable world aggregate uncertainty.     

Short sale constraints,dispersion of opinion,and stock overvaluation: Evidence from earnings announcements in China

Using a clean setting in China, we test the Miller (1977) hypothesis that stocks are overvalued in the presence of short sale constraints and dispersion of opinion as an extension of Berkman et al. (2009). We find that stocks with short sale constraints have significantly negative abnormal returns during earnings announcement periods, especially when investors have diverse opinions. These results are robust to alternative measures of abnormal returns and endogeneity concern. The findings help to explain the impact of short sale constraints on pricing efficiency and have important policy implications for relaxing restrictions on short selling and improving regular information disclosure in emerging markets.     

Welfare comparisons of income distributions and family size: An individualistic approach

We investigate the problem of how to perform comparisons of income distributions across families of different sizes. We argue that social welfare ought to be computed as the average individual utility instead of the average household utility as in most known criteria. We provide dominance criteria which allow for some indeterminacy about the average optimal family size, by resorting to the bounded approach to dominance analysis proposed by Fleurbaey et al. (2003). Indeed, when differences in needs come from family size, a specific population allocation problem (how a population should be optimally divided over families for given resources) adds to the usual income allocation problem. Pro-family and anti-family stances are introduced in order to make explicit the choice of an optimal family size. An application to French data shows that shifting from the household to the individualistic point of view can substantially alter the outlook of dominance results.     

基于CGE模型对中国基础设施建设的减贫效应分析

本文构造了一个含有详细居民分组的中国可计算一般均衡（CGE）模型，对城乡分割的劳动力市场、各类家庭的劳动力供给行为等进行了深入刻画。通过分别在长期和短期的时间框架下进行模拟分析，我们发现：降低转移成本、增加农村转移劳动力在城市就业是促进基础设施发挥减贫作用的关键环节。     

Thy neighbor’s jobs: geography and labor market dynamics

This paper develops three explanations for the extent of correlation between neighboring geographic areas’ economic outcomes. Export-oriented firms in neighboring counties might independently produce similar goods, or might be linked directly through the production of intermediate inputs. In either case, counties are exposed to similar demand shocks. Finally, regions share markets for goods and services that are both produced and consumed locally. Empirical results suggest that much of the ‘risk’ associated with economic decline in neighboring regions can be attributed to industrial similarity rather than direct dependence of jobs in one area on jobs in another.     

Local employment, poverty, and property value effects of geographically-targeted tax incentives: An instrumental variables approach

The federal Empowerment Zone (EZ) program is a set of tax incentives targeted to areas of select cities. I estimate the effect of the EZ program on employment, poverty, and property values by comparing areas that received an EZ to areas that applied (and qualified), but were rejected. Because of endogeneity concerns, I use political representation to instrument for EZ designation. OLS results show a positive and statistically significant effect of the program on employment and poverty. IV estimates suggest the program had no effect on employment and poverty, and instead had a large statistically significant effect on property values.     

Innovation dynamics and fiscal policy: Implications for growth,asset prices,and welfare

We study the equilibrium implications of different fiscal policies on macroeconomic quantities and welfare by utilizing an endogenous growth model that matches asset pricing data well. The fiscal instruments of interest are (i) subsidies to R&D expenditure, consumption and capital investment, and (ii) cuts in labor and corporate tax rates. Our equilibrium analysis provides new insights on the interplay of innovation dynamics and fiscal policy. Importantly, we find growth and welfare to be inversely related when changing R&D subsidies. However, this depends on how well the model reproduces asset pricing dynamics. Moreover, only subsidies to capital investments and cuts in the corporate tax rate have the potential to increase both growth and welfare.     

Independent directors and earnings management: The moderating effects of controlling shareholders and the divergence of cash-flow and control rights

The research results on the suppressing effect of independent directors on earnings management are not consistent in existing literature. In addition, it has been argued that using financial statements provided by top management to investigate top management's earnings management is not appropriate. Therefore, the purpose of this study is twofold. First, we used external auditors (including the auditors of Taiwan Stock Exchange Corporation and the auditors of two Big Four accounting firms – Deloitte & Touche and KPMG in Taiwan) as respondents in order to obtain less biased data. Second, we investigate the moderating effects of controlling shareholders and the divergence of cash-flow and control rights on the relationship between independent directors and earnings management. The results show that both the existence of controlling shareholders and the divergence of cash-flow and control rights have significant suppressing effects on the relationship between independent directors and earnings management. Theoretical and practical implications are also discussed.     

The impact of skills and performance on earnings: evidence from retail bankers in Portugal

This article contributes to the debate on wage flexibility by estimating the return to skills and performance for a sample of Portuguese retail bankers. If the relevance of skills in the contemporary workplace is unquestionable, their role as the main determinant of earnings is doubtful. The argument of this article is that firms are not adjusting individual wages according to information obtained from on-the-job appraisals subsequent to employment. The banks show a selective approach to rewarding skills and performance, and they still manage as an internal labour market. The idiosyncratic nature of skills may offer a partial explanation for the persistence of this model. However, the evidence points to the presence of hybrid models. While the return to organisational skills reinforces the role of specific skills, the return to cognitive skills suggests that there is competition around general skills in the banking industry.     

On-the-job human capital investment and intertemporal substitution: New evidence on intertemporal substitution elasticity

This paper argues that estimates of intertemporal elasticity of substitution (IES) obtained from standard life-cycle models are subject to a downward bias because they neglect the life-cycle and demographic patterns of on-the-job human capital investment. Taking into account the fact that part of a worker's time at work goes to acquiring human capital in addition to his main task of producing goods, we extend the standard life-cycle model to include time spent on investing in on-the-job human capital and propose a new framework for identifying the IES. We obtain statistically significant evidence that conventional estimates of IES for total hours at work are biased downward about 20% at the intensive margin. The corresponding IES estimates for production hours are biased downward even more, which provides an explanation for why output fluctuation is greater than hours/employment fluctuation over the business cycle.     

The impact of diversity and equality management on firm performance: Beyond high performance work systems

This article demonstrates that a diversity and equality management system (DEMS) contributes to firm performance beyond the effects of a traditional high‐performance work system (HPWS), which consists of bundles of work practices and policies used extensively in high‐performing firms. A DEMS typically includes diversity training and monitoring recruitment, pay, and promotion across minority or other disadvantaged groups. Our analysis of quantitative data from service and manufacturing organizations in Ireland confirms that HPWS practices are associated with positive business performance and finds specifically that DEMS practices are positively associated with higher labor productivity and workforce innovation and lower voluntary employee turnover. © 2010 Wiley Periodicals, Inc.