The Distributional Incidence of Growth: A Social Welfare Approach

This paper provides a normative framework for the assessment of the distributional incidence of growth. By removing the anonymity axiom, such framework is able to evaluate the individual income changes over time and the reshuffling of individuals along the income distribution that are determined by the pattern of income growth. We adopt a rank dependent social welfare function expressed in terms of initial rank and individual income change and we obtain partial and complete dominance conditions over different growth paths. These dominance conditions account for the different components determining the overall impact of growth, that is the size of growth and its vertical and horizontal incidence. We then provide an empirical application for Italy: this analysis shows the distributional impact of the recent economic crisis suffered by the Italian populaltion.     

Growth,mobility and social progress

We evaluate social progress on the basis of panel data on individual incomes by comparing the value of social welfare in the observed panel data to its value in a situation where individuals receive their first period income in each period. We derive necessary conditions for the welfare gain to be positive, and show how it can be decomposed in an effect of economic growth, a mobility effect and a cost due to aversion to time fluctuations given individuals’ ranks in the income distribution. The mobility effect, generated by reranking in the income distribution has two components: a cost due to time fluctuations in incomes and a benefit, due to equalization in time averaged incomes. We illustrate the analysis using CNEF data for Australia, Korea, Germany, Russia, Switzerland and the US. Our results indicate that the largest component of social progress is the equalization of time averaged income, induced by reranking. In countries with high growth (Australia, Korea and Russia), the growth effect is larger than the mobility effect, but in countries with low growth (Germany, Switzerland and the US), the opposite holds true. The poor performance of the US is explained by the large costs of income fluctuations and the way economic growth is distributed.     

The Individual Poverty Incidence of Growth

The canonical approach to analyse the poverty impact of growth is based on the comparison of poverty before and after growth. Measurement tools endorsing this approach fail to capture the different experiences of poverty dynamic in the population: there can be groups of the population made poorer or non‐poor made poor by growth. We propose an approach that allows measuring this individual poverty incidence of growth and show how it is related with existing models. We apply our framework to evaluate the poverty impact of growth in Indonesia, by comparing the 1993–2000 with the 2000–07 and 2007–14 growth spells.     

Leading change when business is good. Interview by Paul Hemp and Thomas A. Stewart

Lou Gerstner's was a hard act to follow. As CEO in what were arguably IBM's darkest hours, Gerstner brought the company back from the brink. After nearly ten wrenching years, in which the big-machine manufacturer remade itself into a comprehensive software, hardware, and services provider, business was looking good. So the challenge for Sam Palmisano, when he took over as CEO in 2002, was to come up with a mandate for a second act in the company's transformation. His primary aim was to get different parts of the company working together so IBM could offer customers "integrated solutions"--hardware, software, services, and financing--at a single price. As part of this effort, he asked all of IBM's 320,000 employees, in 170 countries, to weigh in on a new set of shared corporate values. Over a 72-hour period, thousands of IBMers throughout the world gave Palmisano and his executive team an earful in an intranet discussion dubbed "Values-Jam," an often-heated debate about the company's heart and soul. Twenty-four hours into the exercise, at least one senior exec wanted to pull the plug. The jam had clearly struck a chord with employees, but it was a dissonant one, full of rancor and discontent. Palmisano let the discussion continue, and the next day, the mood began to shift. The criticism became more constructive. Out of the million words generated by the jam grew a set of values that, as Palmisano explains in this interview, are meant to guide the operational decisions made by IBM's employees-and, more important, to serve as Palmisano's mandate to continue the reinvention of the company.