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11. Differential bunching impacts across the income distribution: Evidence from Zambian tax administrative data

Author:
Samuel Bryson, Kwabena Adu-Ababio, Evaristo Mwale, and John Rand
Publication Date:
12-2023
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
We investigate the behavioural responses of individual taxpayers to changes in marginal personal income tax rates applying empirical bunching methodology to tax administrative data from Zambia over the period from 2014 to 2021. We find evidence for excess bunching at the first kink in the tax schedule for all years but less evidence of bunching at the second and third thresholds. While bunching is considerable and behavioural responses are observed to changes in the location of the kinks over time, bunching at reference points (‘round-number bunching’) also appears large. Implied elasticities of taxable income are however not remarkable, and comparing actual and estimated counterfactual wage distributions reveal that missed tax revenue arising from the excess bunching is limited. This is consistent with the observed bunching reacting sharply and immediately to changes in the location of the kink points over time, suggesting that observed behavioural change is driven by reporting behaviour rather than real economic responses.
Topic:
Economics, Tax Systems, Income, and Income Distribution
Political Geography:
Africa and Zambia

12. Mobile Internet and income improvement: Evidence from Viet Nam

Author:
Trang Thi Pham
Publication Date:
12-2023
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
New developments of existing technologies over time have led to emergent patterns of technology adoption and, accordingly, changing impacts on economy and society. Focusing on the arrival of mobile internet in the early 2010s in developing countries, this paper identifies significant positive effects on provinces’ average household income in Viet Nam. The effect sizes are larger for lower-income quintiles and for rural areas, suggesting the more inclusive changing impact of the innovation over the last decade. Preliminary evidence of impact mechanisms via skilled employment rates and (formal) wages is also presented. The evidence from Viet Nam, a lower-middle-income country, can bring further understanding in terms of the extent of development impacts of second-generation mobile for development (M4D 2.0) in particular and information and communication technologies for development (ICT4D) in general.
Topic:
Science and Technology, Internet, Rural, Economic Development, Social Mobility, and Income
Political Geography:
Southeast Asia and Viet Nam

13. The dynamics of formal employment during and after the COVID-19 pandemic in Uganda

Author:
Kyle McNabb, Tina Kaidu Barugahara, and Susan Namirembe Kavuma
Publication Date:
12-2023
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper studies the impact of the COVID-19 pandemic on formal sector employment in Uganda. Utilizing employee-level administrative tax data from the Uganda Revenue Authority, we describe the dynamics of employment as the pandemic evolved, seeking to better understand the various coping strategies undertaken by firms in the face of reduced sales and business activity. We find that over one in ten formally employed workers fully lost their incomes in the immediate aftermath of the onset of the pandemic and associated lockdown restrictions. Of those that remained employed, some 14% saw their salaries fall in the short term (to June 2020), and by March 2021 (a full year after the onset of the pandemic) over 9% of the formal workforce were still earning less than pre-pandemic. We subsequently match these pay-as-you-earn records with firms’ income tax returns to better understand how characteristics such as firm size, sector, and profitability affected the likelihood that different coping strategies were undertaken. We find that firms which were larger and more profitable pre-pandemic were more likely to retain their workforce and less likely to cut salaries throughout the course of the pandemic.
Topic:
Employment, Economy, COVID-19, and Income
Political Geography:
Uganda and Africa

14. Price Interventions as a Part of Living Income Strategies: Lessons learned from piloting a price premium mechanism for basmati rice farmers in Pakistan

Author:
Mira Alestig
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
Oxfam Publishing
Abstract:
Small-scale farmers produce many globally important products such as rice, cocoa, cotton and vanilla. Poverty is widespread among these farmers, and there is an urgent need to increase their incomes. A living income – what a household needs to afford a decent standard of living for all its members – is a human right. It is increasingly recognized that paying a living income is the responsibility of businesses. Pricing is a vital part part of this, but raising the prices paid to farmers can be complicated, and many companies still treat it with scepticism. This paper presents lessons learned from the piloting of a novel price premium mechanism in Pakistan. The goal of the price intervention, which targeted basmati rice farmers in Punjab province, was to make a meaningful contribution to the incomes of the most vulnerable small-scale farmers, while at the same time identifying appropriate mechanisms to minimize costs to retailers and/or consumers. The pilot indicates that price, in combination with other complementary measures, can effectively contribute to closing the income gap for even the most vulnerable small-scale farmers, but that any mechanism to raise prices must be designed carefully. The intervention was part of the wider GRAISEA programme, which supports farmers and food producers in South-East Asia.
Topic:
Agriculture, Supply Chains, Income, Rice, and Cost of Living
Political Geography:
Pakistan and South Asia

15. Inequality, Current Account Imbalances and Middle Incomes

Author:
Océane Blomme and Jérôme Héricourt
Publication Date:
04-2023
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
This paper investigates the complex relationship between current account balance and income inequality, putting specific emphasis on the potential sources of non-linearities in the latter. Based on a dataset for 52 developed and developing countries over the period 1990-2019, we first show a one-standard-deviation increase in various income inequality indicators generates a decrease in the ratio of current account over GDP by -0.5 to -0.9 percentage points in developed countries, but no significant impact when the sample is expanded to include emerging and developing countries. We then show those average impacts are distorted along the distribution of economic and financial development variables: for those countries displaying low GDP per capita, low levels of financial deregulation and of capital account openness, additional income inequality actually improves the current account balance. Conversely, the impact of income inequality on current account is all the more negative that financial markets are bigger, more deregulated and more open. In addition, the decrease in the current account balance is 1.2 to 1.4 times more important in countries with higher financial development or more open capital account when the increase in inequality is driven by the income of top earners relative to the middle class rather than by the increase in top earners' incomes at the expense of the lowest percentiles of the distribution. Those results are robust to various robustness checks for endogeneity concerns, possible impact of the Great Financial Crisis, and variable definitions.
Topic:
Inequality, Finance, Middle Class, and Income
Political Geography:
Global Focus

16. Yak Herding as the Main Source of Livelihood: Examining Challenges and Opportunities of Highlanders in Bhutan

Author:
Sonam Wangdi, Kelly Tobden Dorji Tamang, Pelden Wangchuk, and Sherub
Publication Date:
06-2023
Content Type:
Journal Article
Journal:
Journal of Bhutan Studies
Institution:
Centre for Bhutan & GNH Studies (CBS)
Abstract:
Yak farming is the mainstays of nomadic herders’ economy in Bhutan. However, it has declined over the years despite diverse government interventions. Rapid socio-economic development and access to economic opportunities further hindered yak farming culture rather than helping to maintain highlanders’ livelihood. The study was carried out in four gewogs, Chhoekhor, Sephu, Merak and Sakteng, that depends on yaks for their living. Questionnaire based semi-structured interview was conducted to identify the main challenges and opportunities of yak herding within the different regions and examined the cost-benefit of herding yaks within the premises of nomadic herder’s livelihood sustenance. The study revealed that yak farming generates sufficient income to support the herders’ livelihood even though the profit margin was minimal. Around 90% of herders earned cash income from yaks. Dry cheese was the main revenue generator of Chhoekhor and Sephu, while fermented cheese earnt the highest income in Merak and Sephu. Yaks not only serve as the primary source of livelihood but also acts as a catalyst to generate additional income by gaining access to natural resources such as Cordyceps and herbal medicines. However, increased wildlife depredation on yaks and inadequate pastureland coupled with poor modern amenities threatened yak farming. The findings showed a declining trend in total yak population and number of yak-owning households particularly in Chhoekhor and Sephu compared to Merak and Sakteng. The future of yak farming in Bhutan is uncertain, but there is potential to address the challenges and ensure its continued importance to Bhutanese highlanders.
Topic:
Socioeconomics, Livelihoods, Income, Animal Husbandry, and Yak Farming
Political Geography:
South Asia and Bhutan

17. The return of inflation: Can we protect real incomes?

Author:
Manos Matsaganis and Sotiria Theodoropoulou
Publication Date:
11-2022
Content Type:
Working Paper
Institution:
Hellenic Foundation for European and Foreign Policy (ELIAMEP)
Abstract:
High inflation, virtually unknown in advanced economies since the 1980s, has made a comeback. In this policy paper, we first explain where inflation comes from, and describe how the policy context for dealing with it was shaped after Keynesian demand management proved unable to defeat stagflation. We then critically examine the various policy options. Generally speaking, policy makers may attempt to (i) contain inflation by raising interest rates or, more directly, by controlling prices, (ii) alleviate the impact of inflation on household budgets through price subsidies or income transfers, and (iii) protect workers’ real incomes via wage indexation and social pacts. We conclude by assessing the merits, costs, and distributional implications of each option in turn.
Topic:
Economy, Inflation, and Income
Political Geography:
Europe and Global Focus

18. Income and Consumption Inequality in Latin American Countries

Author:
Sungwoo Hong
Publication Date:
07-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
The recent large-scale protests across Latin America show the seriousness of this inequality in the region. Accumulated complaints about poverty, inequality, and the gap between the rich and the poor are the root causes of the massive protests in Chile that broke out in October 2019 and the demonstrations in Colombia that started in April 2021. This brief looks into the following questions: 1) how profound is inequality in Latin America, and has there been no notable change in its pattern over time? 2) Are the current conditions of poverty and inequality and patterns of inequality the same across Latin American countries?
Topic:
Poverty, Income Inequality, Consumption, and Income
Political Geography:
South Asia and Latin America

19. The effectiveness of social protection in five African countries through normal times and times of crisis

Author:
Katrin Gasior, Iva V. Tasseva, and Gemma Wright
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
We study the effectiveness of social protection benefits in reducing income and consumption poverty in five sub-Saharan African countries—Ghana, Mozambique, Tanzania, Uganda, and Zambia—in normal times and times of widespread economic crisis. Using tax–benefit microsimulation models with representative household survey data, first we estimate the coverage of benefits and their poverty-reducing effects in each country. Second, we study the ability of benefit automatic stabilizers to reduce losses in incomes and consumption in times of crisis, by simulating hypothetical reductions to earnings and employment. Although the coverage of benefits is fairly high in Ghana and Zambia, the poverty-reducing impact of benefits in all five countries is low in normal times. The effectiveness of benefits to stabilize income and consumption in times of crisis is also limited because many benefits are linked to proxies of income, not income itself, or have tight eligibility criteria. Social assistance programmes are typically unresponsive to losses in household earnings and employment and provide limited support for unemployed people.
Topic:
Poverty, Crisis Management, Economic Crisis, and Income
Political Geography:
Uganda, Africa, Mozambique, Tanzania, Zambia, and Ghana

20. The determinants of domestic saving in Kenya

Author:
Rodgers Musamali, Cecilia Mutia, and Rose Ngugi
Publication Date:
11-2022
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The savings–growth nexus is widely acknowledged, both in policy and in the literature. But Kenya’s numerous policy initiatives to encourage savings mobilization are yet to yield the expected outcomes. This paper identifies the key drivers of domestic saving in Kenya, exploiting fintech as an alternative channel for savings mobilization, and drawing lessons from the Kenyan experience so far. Using data from various sources, and employing an autoregressive distributive lag estimation model, we find that in the long run, private saving is positively and significantly influenced by the per capita income growth rate, inflation, and age dependency ratio, and negatively influenced by the public saving rate and terms of trade. National saving is positively and significantly influenced by the per capita income growth rate, inflation, and private sector credit growth rates in the long run. Wealth and deposit rates negatively influence national saving. Based on these findings, we recommend the following interventions to grow savings in Kenya: creating decent employment opportunities to enhance income growth; providing sustained financial development with a focus on savings mobilization; creating an enabling environment for the private sector; taking advantage of Kenya’s young population; exploiting mobile money platforms to boost savings. Moreover, households show targeted saving behaviour where they accumulate financial savings and then transform them into savings in kind. Therefore, accounting for savings should go beyond the traditional focus on bank deposits and incorporate savings held in other forms. Households also use non-formal platforms for saving, and we suggest that existing barriers to formal saving platforms be removed to direct more saving into formal channels.
Topic:
Economic Growth, Saving, Income, and Fintech
Political Geography:
Kenya and Africa