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1. The Determinants and Welfare Implications of Labor Share

Author:
Sungbae An, Minsoo Han, Subin Kim, and Jinhee Lee
Publication Date:
03-2021
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
The decline in labor share is recognized as a global phenomenon. Concerns have been raised that this trend will exacerbate the income inequality between business owners as capitalists and households as the labor suppliers, prompting a decline in household income and consumption, which are major driving forces for sustainable growth. Meanwhile, various policy measures have been introduced to raise the labor share, with the aim of correcting inequality and boosting growth. This study explores the determinants of labor share and analyzes the effects of these factors on the economy and social welfare, offering various interpretations and policy alternatives according to economic conditions.
Topic:
Labor Issues, Inequality, Economy, Business, and Welfare
Political Geography:
Asia and Korea

2. Public Transfers and Inequality in China

Author:
Wang Feng
Publication Date:
11-2020
Content Type:
Video
Institution:
Weatherhead East Asian Institute, Columbia University
Abstract:
On October 7, 2020, Wang Feng, Professor of Sociology at UC Irvine joined Columbia's Qin Gao, Professor of Social Policy and Social Work and director of the China Center for Social Policy for an event: "Public Transfers and Inequality in China." With expanded fiscal capacity and rising concerns over economic inequality, the Chinese government in the last decade and a half has vastly rebuilt and expanded its social welfare regime. Using the National Transfer Accounts (NTA) methodology and both micro-level survey data and macro-level government statistics, this study examines the distribution of public transfers in education, health care and pension across generations and income groups in 2014 and compare it with those in 2010. While per capita public transfers in absolute terms remained in favor of higher-income groups and the elderly in 2014, as in 2010, the gap in receiving public transfers between the rich and the poor was reduced notably in this short time period. Public transfers also became more progressive in relative terms, with the bottom income group receiving much higher public transfers relative to their per capita household income than the wealthier groups. These results reveal that although the unequal distribution of public transfers continues and it in part results from the fragmented program design and the legacies of socialist inequalities, China’s expanded social welfare programs have contributed to narrowing the vast income inequality in this country.
Topic:
Economics, Government, Inequality, and Welfare
Political Geography:
China and Asia

3. India's Social Policies: Recent Changes for the Better and Their Causes

Author:
Joachim Betz
Publication Date:
01-2019
Content Type:
Working Paper
Institution:
German Institute of Global and Area Studies
Abstract:
Despite being a consolidated democracy with free and fair elections and having a political system with intense party competition, a relatively vibrant civil society, and a functioning federal set-up, India still ranks poorly in terms of the coverage, generosity, efficiency, and quality of its social protection. This is difficult to explain based on the factors usually advanced for the implementation of generous social policies. A second puzzle is the predominantly protective nature of welfare policies in India in the current era of globalisation, which should necessitate policies enabling workers to participate successfully in a more demanding economic environment. These puzzles may be explained partly by (a) the long-term insulation of the Indian economy from international competition, (b) the low share of industry and modern services in GDP until recently, (c) the precedence of identity policies, (d) the fragmentation of the political sphere, and (e) the meagre empowerment of women in India. We should, however, acknowledge that change is underway and that the picture is not bleak across India as a whole – being supported by economic reforms and growth, a greater degree of decentralisation and party competition within the country, increasingly discerning voters, and progress on female education and employment opportunities.
Topic:
Gender Issues, Reform, Democracy, Social Policy, and Welfare
Political Geography:
India and Asia

4. The Impact of the State on the Quality of an Economic System: A Cross-Country Analysis

Author:
Maciej Bałtowski and Piotr Kozarzewski
Publication Date:
08-2019
Content Type:
Working Paper
Institution:
Center for Social and Economic Research - CASE
Abstract:
The paper discusses the role of the state in shaping an economic system which is, in line with the welfare economics approach, capable of performing socially important functions and achieving socially desirable results. We describe this system through a set of indexes: the IHDI, the World Happiness Index, and the Satisfaction of Life index. The characteris-tics of the state are analyzed using a set of variables which describe both the quantitative (government size, various types of governmental expenditures, and regulatory burden) and qualitative (institutional setup and property rights protection) aspects of its functioning. The study examines the “old” and “new” member states of the European Union, the post-communist countries of Eastern Europe and Asia, and the economies of Latin America. The main conclusion of the research is that the institutional quality of the state seems to be the most important for creation of a socially effective economic system, while the level of state interventionism plays, at most, a secondary and often negligible role. Geographical differentiation is also discovered, as well as the lack of a direct correlation between the characteristics of an economic system and the subjective feeling of well-being. These re-sults may corroborate the neo-institutionalist hypothesis that noneconomic factors, such as historical, institutional, cultural, and even genetic factors, may play an important role in making the economic system capable to perform its tasks; this remains an area for future research.
Topic:
Demographics, Economy, Economic Growth, State, Economic Policy, Institutions, Trade, and Welfare
Political Geography:
Europe, Eastern Europe, Asia, Latin America, and European Union

5. A Quantitative Trade Model with Unemployment

Author:
Kyu Yub Lee
Publication Date:
10-2018
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
Over the last decade, quantifying the welfare effects from tariff changes has become one of the main challenges among international trade economists. There are a number of quantitative trade models with micro-foundations which emphasize demand-side (Anderson and Van Wincoop 2003), supply-side (Eaton and Kortum 2002), Bertrand competition (Bernard et al. 2003), extensive and intensive margin (Chaney 2008), etc, and conclude that trade liberalization with tariff reductions leads an economy to reach a higher level of welfare compared to pre-liberalization (Costinot and Rodriguez-Clare 2014). While elegant, these models inducing gravity equations share the common assumption, a perfect labor market. Quantitative trade models with full-employment developed so far have not taken account of labor market frictions when evaluating the welfare effects from tariff changes. This paper aims to fill the gap in the trade literature by explicitly considering labor market frictions. I employ search-and-matching to a multi-country and multi-sector Ricardian model with input-output linkages, trade in intermediate goods, and sectoral heterogeneity, in order to quantify the welfare effects from tariff changes. The paper shows that labor market frictions can be a source of comparative advantage in the sense that better labor market conditions contribute to lower cost in production. Labor market frictions play a critical role in determining the probability of exporting goods to trading partners, and interact with bilateral trade share, price, expenditures, etc. Unemployment and changes in unemployment rates due to tariff reductions contribute welfare changes across countries, implying that welfare effects based on quantitative trade models with full-employment are likely to be biased. I confirm the biased welfare effects by revisiting Caliendo and Parro (2015), who conduct an analysis of the welfare effects from the NAFTA from 1993 to 2005. I show that the welfare gap between theirs and mine has a positive correlation with changes in observed unemployment rates across countries. With the constructed model, I further conduct counterfactual exercises by asking what would happen if China’s tariffs remain unchanged from 2006 to 2015. It turns out that there are mild welfare effects to trading partners in the world trading system.
Topic:
Tariffs, Economic Policy, Trade, Unemployment, and Welfare
Political Geography:
China and Asia

6. Inequality dynamics in China: Income growth for the poor, but more for the rich

Author:
Shi Li and Terry Sicular
Publication Date:
12-2018
Content Type:
Policy Brief
Institution:
United Nations University
Abstract:
In the late 1970s, China embarked on a major programme of economic transition and reform. Since then, China’s economy has been transformed from a socialist planned economy to a predominately market economy characterized by a combination of state, private, and mixed forms of ownership. Over the past forty years, household incomes have risen six-fold, poverty has declined dramatically, and in recent years a new class of ultra-rich has emerged. These developments have naturally led to questions about inequality trends in China.
Topic:
Economics, Poverty, Reform, Income Inequality, and Welfare
Political Geography:
China and Asia

7. India’s Democracy at 70: Growth, Inequality, and Nationalism

Author:
Ashutosh Varshney
Publication Date:
07-2017
Content Type:
Journal Article
Journal:
Journal of Democracy
Institution:
National Endowment for Democracy
Abstract:
Of late, Indian democracy has been confronted with a new political economy. Strong economic growth over the last three decades has generated the world’s fourth-largest collection of dollar billionaires and the third-largest middle class, both for the first time in Indian history, while still leaving the single largest concentration of the poor behind. In a democracy where the lower-income groups have come to vote as much as, or more than, the higher-income groups, the polity must find creative ways of walking on two legs: maintaining the momentum of economic growth while also taking care of mass welfare.
Topic:
Political Economy, Elections, Democracy, and Welfare
Political Geography:
India and Asia

8. Migrants in construction work: Evaluating their welfare framework

Author:
Shamindra Nath Roy and Mukta Naik
Publication Date:
06-2017
Content Type:
Policy Brief
Institution:
Centre for Policy Research, India
Abstract:
More than two decades after the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 and the Building and Other Construction Workers Welfare Cess Act, 1996 came into force, the efficacy of this framework remains in question. Correctional steps have the potential to extend social benefits to construction workers, especially migrants who face particular vulnerabilities. Available data regarding implementation of the Acts by States presents a picture of overall tardiness and delay with wide variations. States need to ramp up worker registration; data suggests that lowering entry barriers for migrants improves registration and consequently, access to welfare benefits. While collection of cess funds has improved and is broadly proportionate to construction activity, their utilisation remains dismal. States need to think strategically on how to spend accumulated cess funds—especially on housing, occupational health and safety, grievance redressal and legal aid—and sustain welfare provisions over time. Accumulated unspent funds offer an opportunity for big-ticket, one-time expenditures. Examples from some States show that collaboration with civil society organisations could improve outreach, particularly to migrants.
Topic:
Migration, Labor Issues, Legislation, Labor Policies, and Welfare
Political Geography:
South Asia, India, and Asia

9. Welfare Analysis of Changing Food Prices: A Nonparametric Examination of Export Ban on Rice in India (pdf)

Author:
Ben Groom and Mehroosh Tak
Publication Date:
01-2013
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
During the world food crisis of 2007-08, the price of staples soared rapidly. Higher food price impacts poor households more as they spend approximately three quarters of their income on food. Together rice and wheat provide more than 50% of the calorific intake in India. Apart from providing food security, millions of poor and small farmers depend on rice for their livelihoods. Using Indian Consumer Household Expenditure surveys for the years 2007-08 and 2009-10 the paper analyses the welfare generated by a ban on export of rice by the Indian government. The paper finds that the net impact of the ban on export of rice was positive, as it was able to cushion the Indian population (87% of whom are net consumers) from the adverse effects of the crisis. It also found that the poor in India aren’t homogeneous in nature. The majority of the rice-producing households that stand to gain from increased prices are relatively poor farmers. At the same time, the poor households that do not cultivate rice are most affected by price increase, as their budget share of rice is higher than richer households, who are more resilient to price rise. In particular, the wage labourers are affected significantly.
Topic:
Agriculture, Poverty, Food Security, Inequality, Exports, and Welfare
Political Geography:
India and Asia

10. DPJ’s Broken Promise and the End of the Anti-Koizumi Era in Japan

Author:
Junghwan Lee
Publication Date:
08-2012
Content Type:
Working Paper
Institution:
East Asia Institute (EAI)
Abstract:
The Democratic Party of Japan (hereafter DPJ) has ruled Japan since 2009 but is now at risk with Ozawa Ichiro’s departure from the DPJ only after three years. On July 2, 2012, Ozawa, former DPJ president and influential figure in DPJ intraparty dynamics, announced his departure from the DPJ with 49 fellow Diet members. He and his fellows have criticized the DPJ’s election manifesto and fundamental identity as being broken with Prime Minister Noda Yoshihiko’s effort to raise the consumption tax. A split of Ozawa’s group from the DPJ seemed inescapable when Ozawa and 56 fellows voted against a bill for a consumption tax hike in the Lower House on June 26, 2012. Noda’s continued support for the consumption tax hike and Ozawa’s reactive choice to break away have increased political uncertainty in Japan. Japan may undergo Diet dissolution and a general election this fall due to the divided DPJ. How can we understand the DPJ’s endogenous collapse and what will be the impact of this political upheaval on Japan’s political future? I argue that DPJ solidarity did not have a strong foundation beyond an anti-Koizumi framework and that there was no intraparty consensus on some DPJ leaders’ new policy agenda, which is not related to the anti-Koizumi framework. When Koizumi Junichiro aggressively enhanced neoliberal structural reforms in the early 2000s, DPJ politicians were at first perplexed because Koizumi’s key agendas were well matched with their “small government” orientation. However, they soon found a solution for the anti-Koizumi framework with a doctrine for “more universal welfare without a tax hike” under the leadership of Ozawa. The DPJ’s differentiation from Koizumi’s Liberal Democratic Party (hereafter LDP) was successful in the 2007 Upper House election and the 2009 Lower House election. However, Kan Naoto and Noda have tried to deviate from an Ozawa-led manifesto of no tax hike since 2010 because they found that a stable universal welfare system demands sound fiscal conditions and that a consumption tax increase is the only way of relieving the huge fiscal deficit problem. When the anti-Koizumi was exhausted as a core driving force of DPJ solidarity, the DPJ had become stuck in diverging policy orientations between fiscal soundness and no tax hike—and finally split. The divided DPJ symbolizes the end of the anti-Koizumi era in Japanese politics. Koizumi’s structural reform has dominated the discourse of Japanese politics in the last decade. However, the end of the anti-Koizumi era never means the rise of new discourse of Japanese politics. Since the DPJ and the LDP lost their differences on policy orientations, the stable two-party competition structure is dwindling in Japan. The more crucial point is that Japanese political leaders do not have new visions for Japan’s future political economic model beyond Koizumi’s structural reform and the anti-Koizumi framework’s emphasis on welfare.
Topic:
Reform, Elections, Domestic Politics, and Welfare
Political Geography:
Japan and Asia