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Larger social spending budgets have not produced any net loss of GDP, or in skills, or in work. Without any such costs, Europe’s welfare states have produced greater equality, cleaner government, and even longer life. So says the international evidence for any decade or combination of decades back to 1880, before which there was little social spending at all. The belief that greater social spending must somehow shrink the size of the economic pie is in trouble, and is likely to keep retreating in the wake of the slump of 2020.
This chapter explores the pathologies of human nature. It describes why human population matters for climate governance, especially insofar as it is associated with voluntary material consumption. Consumption almost invariably involves the direct or indirect use of energy, which globally still comes disproportionately from fossil fuels and thereby contributes to greenhouse gas pollution. This means that, while the size of the human population matters greatly for climate change, what matters even more is how many people are consuming more than necessary to meet their needs. This chapter also describes some of the individual, social and economic forces that stimulate people’s consumption behaviors. One of the contemporary pathologies of human nature is increasing materialism and overconsumption. Finally, the chapter highlights how the impact of human nature on climate change and its governance is being exacerbated enormously as more people around the world obtain the economic resources to consume much like people of the developed world. The globalization of consumption is a growing force that has made effective climate governance extraordinarily difficult.
When some steps of a complex, multi-step task are automated, the demand for human work in the remaining complementary sub-tasks goes up. In contrast, when the task is fully automated, the demand for human work declines. Upon aggregation to the macroeconomic scale, partial automatability of complex tasks creates a bottleneck of development, where further growth is constrained by the scarcity of essential human work. This bottleneck is removed once the tasks become fully automatable. Theoretical analysis using a two-level nested constant elasticity of substitution production function specification demonstrates that the shift from partial to full automation generates a non-convexity: humans and machines switch from complementary to substitutable, and the share of output accruing to human workers switches from an upward to a downward trend. This process has implications for inequality, the risk of technological unemployment, and the likelihood of a secular stagnation.
In this chapter of our book, we investigate the effect of the CPSU legacy on the economic performance of Russian regions. We use a broad catalogue of indicators, looking at the economic growth, foreign trade (both the overall volume and the geographic orientation) and innovation activity of Russian firms, measured by patent applications and the number of issued patents. We find that the CPSU legacy does not affect economic growth. However, it has an influence on the innovation activity of Russian firms. In regions with larger CPSU membership in the past, firms are characterized by lower innovation activity. Again, this is most likely linked to the persistence of Soviet bureaucratic practices.
This chapter uses original subnational data on land reform in Peru as well as data on property rights and metrics of development to investigate how the creation of local-level property rights gaps shaped subsequent economic and social outcomes linked to development. The analyses utilize a geographic regression discontinuity design that takes advantage of Peru’s regional approach to land reform through zones that did not entirely map onto major pre-existing administrative boundaries. These zones were created with aid from the United States in the aftermath of World War II. This chapter finds that local property rights gaps in Peru drove a slower shift away from agricultural labor, lower agricultural productivity and educational attainment, and higher rates of inequality and poverty. Land titling that began under President Fujimori's neoliberal reforms helped to close the property rights gap. But some of its negative development consequences persisted, in part due to a return to land inequality. The findings are not driven by Peru's civil war, pre-reform hacienda presence, or public goods provision.
When rural populations hold land without property rights, this has important and wide-ranging economic, social, and political consequences. Property rights gaps keeps land reform beneficiaries dispersed across the countryside working in agriculture, slowing urbanization. Property rights gaps distort incentives to invest in improvements and inputs due to land tenure insecurity and a lack of access to credit, slowing growth in agricultural productivity. And property rights gaps are linked to urban policy bias by disadvantaging rural dwellers from accessing the same basic services such as education and opportunities for employment by the state that urban dwellers enjoy. These dynamics fuel economic inequality and they sow the seeds of underdevelopment and slow economic growth. Property rights gaps also have direct political consequences that shape the nature of access to power, the ability to translate preferences into policy, and contestation within society. They inhibit the ability of rural groups to exercise political power relative to cities. And they They are foster clientelism and vote buying rather than programmatic linkages between parties and voters.
The environmental imaginary of the post-apartheid state is focused on economic growth; nature is viewed as a store of resources for development for economic growth, rather than for social welfare or environmental sustainability. It is an imaginary which involves conflict and violence both to nature and people. But this hegemonic imagery is increasingly being challenged by disparate groups of the poor and marginalised who are promoting an alternative environmental imaginary centred on nature as a source of justice, meaning the acknowledgement of rights (which often implies the need for redistribution) and livelihoods. For black South Africans the right to land is a painful reminder of the years of colonial dispossession, apartheid removals and restriction of land ownership to a small percentage of the population. It is essential to traditional identities, social cohesion and connections to the ancestors, as well as a source of livelihoods. This is illustrated by the struggles of the people of Xolobeni against an Australian corporation intent on mining their land, with the support of the post-apartheid state. The struggle involves increasing violence, including killing their leaders.
The phenomenon of commodity booms is the focus of this chapter. Lately commodity booms have attracted a lot of attention from academic researchers, but also from producers, industry investors and other actors with an interest in the production and consumption of primary commodities. The chapter starts with the definition of commodity booms. Three commodity booms in the period since the Second World War are identified and described in the chapter.
Corruption is widely believed to have an adverse effect on the economic performance of a country. However, many East-and-Southeast-Asian countries either achieved or currently are achieving impressively rapid economic growth despite widespread corruption – the so-called East-Asian-Paradox. A common feature of these countries was that they were autocracies. We re-examine the corruption-growth relationship, in light of the East-Asian-Paradox. We examine the role of political regimes, in mediating corruption–growth relationship using panel data over 100 countries for the period 1984–2016. We find clear evidence that corruption–growth relationship differs by the type of political regime, and the growth-enhancing effect of corruption is more likely in autocracies than in democracies. The marginal effect analysis shows that in strongly autocratic countries, higher corruption may lead to significantly higher growth, while this is not the case in democracies. Alternatively, democracy is not good for growth if there is a high level of perceived corruption. We provide suggestive evidence that the mechanism by which corruption is growth-enhancing in autocracies is through the perceived credibility of the commitment of ruling political elites to economic freedom, thereby providing confidence to the firms to invest, leading to long-term growth.
Between 1985 and 2018, Brazilian economic well-being stagnated, with lackluster growth and regressive public policies destroying citizens’ life opportunities. There is considerable consensus about the sources of this low-level economic equilibrium, including low savings, low investment, and modest human capital improvements. Despite this consensus, and despite decades of reform, however, the overall institutional equilibrium changed only marginally. Drawing on the study of varieties of capitalism, this chapter describes how institutional complementarities drove actors’ incentives toward a collectively suboptimal equilibrium. Complementarities within and across five domains sustained the equilibrium: 1) the macroeconomy of a middle-income developmental state, 2) the microeconomy of firm organization; 3) the coalitional presidential political system; 4) the weak control mechanisms this political system set in place; and 5) an autonomous bureaucracy that permitted incremental reform but in consequence, may have moderated demands for more dramatic reforms while deepening fiscal constraints and impelling policymakers to preserve the tool kit of the developmental state.
Public expenditure reforms over past decades have reinvigorated states and economies in many countries. A first group of countries already started to reform their public expenditure in the early to mid-1980s, as the negative side effects of high spending, taxes and deficits grew. A second group of reformers followed in the early to mid-1990s. These countries reduced public expenditure significantly as part of comprehensive reform agendas. Reforms focussed on consumption expenditure and the welfare state, and improved economic structures and institutional frameworks. This strengthened public finances, growth and employment. Only a few countries did not reform, and their public expenditure continued to rise strongly. In the 2010s, a third group of countries in Europe started to reform in the context of the global financial crisis. These countries also curtailed expenditure significantly and undertook institutional reform to the benefit of fiscal sustainability, growth and employment.
Policy lessons are often drawn from the emergence in Europe of ‘inclusive’ institutions, which are held to have displaced ‘extractive’ institutions and fostered economic growth. This article analyzes the concept of inclusiveness using evidence on a historical institution that has been widely viewed as inclusive – the guild. It finds that we must differentiate between three types of inclusiveness: community, corporative, and societal. Community inclusiveness refers to the share of individuals involved in an institution's operations, corporative inclusiveness the share of political representation enjoyed by the institution itself, and societal inclusiveness the extent to which the institution enables full economic and political participation by everyone in society. We must also distinguish between general inclusiveness, which takes into account general-equilibrium effects, and partial inclusiveness, which assumes away such effects. Inclusiveness and extractiveness are not opposites in theory, and guilds show why certain types of inclusive institution are likely to behave in extractive ways. Finally, guilds alert us to trade-offs between inclusive economic institutions, inclusive political institutions, and inclusive growth. History does not imply abandoning the concept of inclusiveness, but rather thinking about it carefully.
Governments should provide value for money from public spending. They do so when they perform well on core tasks and ensure efficiency by spending wisely. Core tasks on which we measure performance and efficiency include the quality of public administration, education, health and infrastructure, as well as economic stability, prosperity and income distribution. The picture for performance and efficiency is very mixed across countries. The three ‘small’ governments of Switzerland, Australia and Ireland perform best overall, with a 50% higher score than the worst performers. Efficiency differences are even greater. ‘Small’ governments as a group tend to do best as regards public administration, the economy and overall. ‘Medium’-sized governments perform least well on the whole but show a wide divergence: some of them are very efficient in providing education, health and infrastructure. ‘Big’ government countries show more equal income distribution but at the ‘price’ of higher taxes and unemployment. Needless to say, this analysis is illustrative and needs to be taken with a grain of salt.
The UK faces a number of economic challenges in the short to medium term. Prior to COVID-19, renegotiation of trading arrangements with the European Union was the most prominent of these. We build on existing macroeconomic analysis by assessing prospects for the UK’s regions generated by combining a global macroeconometric model and a regional computable general equilibrium of the UK. A central macroeconomic scenario shows a national average annual GDP growth rate of 1.7 per cent to 2044. When the macroeconomic scenario is applied across regions, growth rates range from 1.6 per cent for Cambridge to 2.2 per cent for Pembrokeshire; the standard deviation is low at 0.07 per cent and the coefficient of variation is 0.04 per cent. In contrast, much wider variation is observed in the standard deviation for exports (0.36 per cent), investment (0.11 per cent) and consumption (0.14 per cent). The country results favour Scotland, which grows at an annual rate of 1.8 per cent, whereas Wales is the slowest growing of the countries at 1.7 per cent. Consistent with the macroeconomic analysis, international trade is the most important contributor to the regional variation in growth rates. We also analyse the effects of higher government consumption relative to the forecasts and find most regions are predicted to experience lower economic activity except the handful in which government consumption is a much higher share of GDP than average.
Under the Trump administration, a transatlantic trade conflict has been escalating step by step. First, it was about tariffs on steel and aluminium, then about retaliation for the French digital tax, which is suspended until the end of the year. Most recently, the US administration threatened the European Union with tariffs on cars and car parts because of Canadian seafood being subject to lower import duties. As simulations with NiGEM show, a further escalation of the transatlantic trade conflict has the potential to slow down economic growth significantly in the countries involved. This is a considerable risk given the fact that the countries have to cope with the enormous negative effects of the pandemic shock. Furthermore, the damage caused by the trade conflict depends on the extent to which the affected countries use fiscal policy to stabilise their economies.
Recently, Penn World Tables include new data that enable calculation of total factor productivity in addition to output for a large set of countries. We use these new data to examine convergence and divergence across countries by applying a new approach, which differentiates between the dynamics of output and of productivity. Our empirical results lead to two main new contributions to the literature. The first is on the interpretation of “β-convergence” in “growth regressions.” It means that output per worker in each country converges to productivity but does not imply convergence across countries, since productivity tends to diverge from the global frontier. The second contribution is to the literature, which finds that income gaps across countries are due mainly to differential technology adoption. This paper shows that the gaps in technology are not only large but keep growing over time.
In order to design, enact, and protect poverty alleviation policies in developing countries, we must first understand the psychology of how the poor react to their plight, and not just the psychology of the privileged called upon for sacrifice. This book integrates social and psycho-dynamic psychology, economics, policy design, and policy-process theory to explore ways to follow through on successful poverty-alleviation initiatives, while averting destructive conflict. Using eight case studies across Latin America, Southeast Asia, and South Asia, William Ascher examines successes and failures in helping the poor through affirmative action, cash transfers, social-spending targeting, subsidies, and regional development. In doing so, he demonstrates how social identities, attributions of deservingness, and perceptions of the policy process shape both the willingness to support pro-poor policies and the conflict that emerges over distributional issues.
This chapter looks at the major energy-related problems facing Africa, including costs, environmental pollution, social inequities, and infrastructure challenges. It provides an understanding of the major challenges of energy poverty, including: (i) The problem of lack of access to electricity, options to address this problem, strategies and policies to implement these options, and examples where the problem has been addressed; (ii) The problem of dependence on dirty cookstoves for major energy needs, options to address this problem, strategies and policies to implement these options, and examples where the problem has been addressed. The chapter also looks at the potential for African countries to leapfrog traditional energy sources and infrastructure to distributed renewable energy systems and innovative transportation systems.
Are institutions a deep cause of economic growth? This paper tries to answer this question in a novel manner by focusing on within-country variation, over long periods of time, using a new hand-collected data set on institutions and the power-ARCH econometric framework. Focusing on the case of Brazil since 1870, our results suggest (a) that both changes in formal political institutions and informal political instability affect economic growth negatively, (b) there are important differences in terms of their short- versus long-run behaviour, and (c) not all but just a few selected institutions affect economic growth in the long-run.
It is to estimate the trend of suicide rate changes during the past three decades in China and try to identify its social and economic correlates.
Official data of suicide rates and economic indexes during 1982–2005 from Shandong Province of China were analyzed. The suicide data were categorized for the rural / urban location and gender, and the economic indexes include GDP, GDP per capita, rural income, and urban income, all adjusted for inflation.
We found a significant increase of economic development and decrease of suicide rates over the past decades under study. The suicide rate decrease is correlated with the tremendous growth of economy.
The unusual decrease of Chinese suicide rates in the past decades is accounted for within the Chinese cultural contexts and maybe by the Strain Theory of Suicide.