You're cruel, TB, inflicting that much on a night reader ! <GG>
I do appreciate your provision of the links and sublinks. They give a view of the information being bandied about in high places, which nessitates review.
on average, within countries, incomes of the poor rise equi-proportionately with average incomes.
Equi-proportionately, is not the same as equally. Yes, when average incomes rise, the income of the poor rises. If the wealthier rise faster, a growing disparity exists even though each has gained. Their methods indicate the poor rise equally or slightly better than the rest, percentagewise, though.
We empirically examine the importance of four such factors in determining the income share of the poorest: primary educational attainment, public spending on health and education, labor productivity in agriculture relative to the rest of the economy, and formal democratic institutions. While it is plausible that these factors are important in bettering the lot of poor people in some countries and under some circumstances, we are unable to uncover any systematic evidence that they raise the share of income of the poorest in our large cross-country sample.
That blows a hole in my supposition of the importance of these things.
Thus, it is almost always the case that the income of the poor rises during periods of significant growth.
I would guess that periods of growth often create labor shortages, creating income rises across the board.
Openness to international trade raises incomes of the poor by raising overall incomes. The effect on the distribution of income is tiny and not significantly different from zero. The same is true for improved rule of law and financial development, which raise overall per capita GDP but do not significantly influence the distribution of income. Reducing government consumption and stabilizing inflation are examples of policies that are "super-pro-poor". Not only do both of these raise overall incomes, but they appear to have an additional positive effect on the distribution of income, further increasing incomes of the poor. In the case of reducing government consumption, this additional distributional effect is statistically significant in some of our specifications, and the pro-poor effect of reducing high inflation is also close to significant.
3 From this we conclude that the basic policy package of private property rights, fiscal discipline, macro stability, and openness to trade increases the income of the poor to the same extent that it increases the income of the other households in society. This is not some process of "trickle-down," which suggests a sequencing in which the rich get richer first and eventually benefits trickle down to the poor. The evidence, to the contrary, is that private property rights, stability, and openness directly and contemporaneously create a good environment for poor households to increase their production and income.
So trade & inflation reduction & governmental spending restraint = the poor gain equally (percentagewise) with the others. And most social spending on the poor does not impact their earnings positively, they indicate, except health care, where different studies suggest a zero-to-plus impact exists.
We measure mean income as real per capita GDP at purchasing power panty in 1985 intemational dollars
I suspect they misspelled 'parity'. Though panties as a form of currency, does provide a riper set of variables. <GG>
While I did ask for source citing and detail, this further reading provides more than enough to conclude these guys are not simply pulling numbers out of the air. And I'll admit, their mathematic models whoosh right by my comprehension. This squares with my studies which indicate that (a) economists are overpaid because nobody can make sense out of their conclusions and (b) they look like werewolves when naked.
5. Conclusions
It should come as no surprise that the general relationship between growth of
income of the poor and growth of mean income is one-to-one. What is new here is that we show that a number of popular ideas about the poverty-growth nexus are not supported by empirical evidence in a very large sample of countries spanning the last four decades. In particular,
* The poverty-growth relationship is not different in negative growth (crisis) episodes and normal growth periods;
* The poverty impact of growth has not declined in recent decades;
* Growth spurred by open trade or other macro policies (good rule of law, low
government consumption, macro stability, financial development) benefits the poor as much as it does the typical household; and
* Growth of income of the poor does not appear to respond systematically to a number of supposedly 'pro-poor" policies including formal democratic institutions and public expenditure on health and education. This does not imply that growth is all that is needed to improve the lives of the poor. Rather, these findings leave plenty of room for further work, because they emphasize the fact that we know very little about what systematically causes changes in the distribution of income. What we do learn is that growth generally does benefit the poor as much as everyone else, so that the growth-enhancing policies of good rule of law, fiscal discipline, and openness to international trade should be at the center of successful poverty reduction strategies.
Again, I do not doubt that these are core essentials to GDP growth and income growth.
My questions remain in the real world, as opposed to pure scientific models that cannot possibly factor in the human equations, yet should not factor them out to arrive at a workable formula:
1) With no corresponding cost of living data, it cannot be determined if the income gains provide any life improvement. Thus, I maintain the 'minutes worked to buy a pair of shoes' is a better way to measure gain. It also helps overcome income differences attributable only to working longer hours.
2) The misuse of percentages is another concern. Let's say 1 guy makes 1,000 and another guy makes 1,000,000. They each get a 10% increase; thus their increase is equal, so the disparity between rich and poor has not increased, right? Wrong. Now one guy makes $1.1m and the other, $1100. The disparity has increased by $99,900. But percentagewise, it has not.
3) If opening trade creates the tapping out of arable land through monoculture, overuse of chemicals, etc..... or creates a byproduct of a toxic waste dump in a poorer area, or adversely impacts the potable drinking water in an area, there can be a health cost to the poor, draining off the income increase and more.
4) There is no way to truly measure cross-border. If Nike moves its factories from the US to Indonesia, the increased bottom line raises the income of Nike's US mgt and shareholders and raises the income of the low end factory workers in Indonesia. Did the growth percentages of those two groups stay equal? What about the income levels of the displaced US factory workers?
These are just a few of the more important things that need to be taken into account that may not be mathematically determined, other than my shoe-buying proposition, which can.
I'm not an anti-globalist; I see it as a possible plus to folks in developing countries. But I do believe in environmental and labor safeguards. So my position is not US-protectionist, but health-protectionist. Crunching logarithmic numbers can only tell half the story, but these guys told it pretty well, for werewolves. |
