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This paper explores the economic impacts of two related tracks of China's expected transformation—economic slowdown and rebalancing away from investment toward consumption—and estimates the spillovers for the rest of the world, with a special focus on Sub-Saharan African countries. The paper finds that an average annual slowdown of gross domestic product in China of 1 percent over 2016–30 is expected to result in a decline of gross domestic product in Sub-Saharan Africa by 1.1 percent and globally by 0.6 percent relative to the past trends scenario by 2030. However, if China's transformation also entails substantial rebalancing, the negative income effects of the economic slowdown could be offset by the positive changes brought along by rebalancing through higher overall imports by China and positive terms of trade effects for its trading partners. If global supply responds positively to the shifts in relative prices and the new sources of consumer demand from China, a substantial rebalancing in China could have an overall favorable impact on the global economy. Economic growth could turn positive and higher on average, by 6 percent in Sub-Saharan Africa and 5.5 percent globally, as compared with the past trends scenario. Finally, rebalancing reduces the prevalence of poverty in Sub-Saharan Africa compared with the isolated negative effects of China's slowdown, which slightly increase the incidence of poverty. Overall, China's slowdown and rebalancing combined are estimated to increase gross domestic product in Sub-Saharan Africa by 4.7 percent by 2030 and reduce poverty, but the extent of this varies by country.

This paper establishes that the rise in the income share of information and communication technology accounts for half of the decline in labor income share in the United States. This decline can be decomposed into a sharp decline in the income share of “routine” labor—which is relatively more prone to automation—and a milder rise in the non-routine share. Quantitatively, this decomposition suggests large effects of information and communication technology on the income distribution within labor, but only moderate effects on the distribution of income between capital and labor. A production structure calibrated to match these trends suggests modest aggregate welfare gains from automation.

The authors use the night lights (satellite imagery from outer space) approach to estimate subnational 2013 GDP growth and levels for 47 counties in Kenya and 30 districts in Rwanda. Estimating subnational GDP is consequential for three reasons: First, there is strong policy interest in seeing how growth can occur in different parts of countries, so that communities can share in national prosperity and not get left behind. Second, sub-nationals themselves want to understand how they stack up against their neighbors and competitors, and how much they contribute to national GDP. Third, such information could help private investors to better assess where to undertake investments. Using night lights has the advantage of seeing a new (and more accurate) estimation of informal activity, and being independent of official data. However it may underestimate economic activity in sectors that are largely unlit (notably agriculture). Indeed, we find that the association between nightlights and GDP is stronger where unlit agriculture accounts for a smaller part of overall economic activity. With these caveats in mind, our analysis yields some interesting results. For Kenya, our results affirm that Nairobi County is the largest contributor to national GDP. However, at 13 percent, this contribution is lower (of 60 percent) as commonly thought. For Rwanda, the three Districts of Kigali account for 40 percent of national GDP, underscoring the lower scale of economic activity in the rest of the country. To get a composite picture of subnational economic activity, especially in the context of rapidly improving official statistics in Kenya and Rwanda, the authors note the importance of estimating subnational GDP using standard approaches (production, expenditure, income).

This paper uses the night lights (satellite imagery from outer space) approach to estimate growth in and levels of subnational 2013 gross domestic product for 47 counties in Kenya and 30 districts in Rwanda. Estimating subnational gross domestic product is consequential for three reasons. First, there is strong policy interest in how growth can occur in different parts of countries, so that communities can share in national prosperity and not get left behind. Second, subnational entities want to understand how they stack up against their neighbors and competitors, and how much they contribute to national gross domestic product. Third, such information could help private investors to assess where to undertake investments. Using night lights has the advantage of seeing a new and more accurate estimation of informal activity, and being independent of official data. However, the approach may underestimate economic activity in sectors that are largely unlit notably agriculture. For Kenya, the results of the analysis affirm that Nairobi County is the largest contributor to national gross domestic product. However, at 13 percent, this contribution is lower than commonly thought. For Rwanda, the three districts of Kigali account for 40 percent of national gross domestic product, underscoring the lower scale of economic activity in the rest of the country. To get a composite picture of subnational economic activity, especially in the context of rapidly improving official statistics in Kenya and Rwanda, it is important to estimate subnational gross domestic product using standard approaches (production, expenditure, income).

Colombia has the seventh highest Gini coefficient of income inequality in the world. The Santos Administration is aware of this challenge and has taken important steps to reduce disparities. The Government is also aspiring to join the OECD, which exhibits much lower income disparities, mainly as a result of effective policies of fiscal redistribution. In Colombia, meanwhile, direct taxes, indirect taxes, and monetary transfers hardly dent the high Gini coefficient. To reduce income inequality, Colombian policy makers could consider introducing a more progressive tax-transfer system. This paper ranks alternative inequality-reducing fiscal policy options based on their effectiveness. It argues that there are potentially important redistributive potential gains available from tax reforms if combined with good spending decisions. It presents an illustrative reform package that would be sufficient for Colombia to reach levels of inequality similar to Chile or Costa Rica in a fiscally neutral manner. Nonetheless, further analysis is needed to explore all available policy options and identify those that are best suited for Colombia.

Reforms in recent decades have sharply reduced the distortions affecting agriculture in developing countries, particularly by cuts to agricultural export taxes and by some reductions in government assistance to agriculture in high-income countries, but international trade in farm products continues to be far more distorted than trade in nonfarm goods. This paper summarizes a series of empirical studies that focus on the effects of the remaining distortions to world merchandise trade for poverty and inequality, especially in developing countries. To obtain different insights into the various impacts, two global studies are undertaken using the World Bank's Linkage model, one multi-country study uses the Global Trade Analysis Project (GTAP) model, and ten country case studies are also included, each using a national economy-wide model. The Linkage model results suggest that liberalization will reduce international inequality, largely by boosting farm incomes and raising real wages for unskilled workers in developing countries, and will reduce the number of poor people worldwide by 3 percent. The analysis based on the GTAP model for a sample of 15 countries, and the ten stand-alone national case studies, all point to larger reductions in poverty, especially if only the non-poor are subjected to increased income taxation to compensate for the loss of trade tax revenue.

This paper analyzes the economic effects of agricultural price and merchandise trade policies around the world as of 2004 on global markets, net farm incomes, and national and regional economic welfare and poverty, using the global economy wide Linkage model, new estimates of agricultural price distortions for developing countries, and poverty elasticity's approach. It addresses two questions: to what extent are policies as of 2004 still reducing rewards from farming in developing countries and thereby adding to inequality across countries in farm household incomes? Are they depressing value added more in primary agriculture than in the rest of the economy of developing countries, and earnings of unskilled workers more than of owners of other factors of production, thereby potentially contributing to inequality and poverty within developing countries (given that farm incomes are well below non-farm incomes in most developing countries and that agriculture there is intensive in the use of unskilled labor)? Results are presented for the key countries and regions of the world and for the world as a whole. They reveal that, by moving to free markets, income inequality between countries will be reduced at least slightly, all but one-sixth of the gains to developing countries will come from agricultural policy reform, unskilled workers in developing countries the majority of whom work on farms will benefit most from reform, net farm incomes in developing countries will rise by 6 percent compared with 2 percent for non-agricultural value added, and the number of people surviving on less than US$1 a day will drop 3 percent globally.

This paper addresses the potential effects of world agricultural trade liberalization on poverty and regional income distribution in Brazil, using an inter-regional applied general equilibrium (AGE) and a micro-simulation model of Brazil tailored for income distribution and poverty analysis by using a detailed representation of households. The model distinguishes 10 different labor types and has 270 different household expenditure patterns. Income can originate from 41 different production activities located in 27 different regions in the country. The AGE model communicates to a micro-simulation model that has around 112,000 Brazilian households and 264,000 adults. Poverty and income distribution indices are computed over the entire sample of households and persons, before and after the policy shocks. The simulated trade liberalization scenario causes agriculture to expand considerably and so, given the importance that agriculture still has for the poorest in Brazil, it has positive impacts on poverty in Brazil. The only states which show an increase in the number of poor households are Sao Paulo and Rio de Janeiro, where the bulk of the manufacturing activities in Brazil are concentrated. There is an even more positive impact on inequality. The higher fall in the poverty gap is shown to occur mainly on the poorest household groups, suggesting that the poorest among Brazil's poor will benefit more from global trade liberalization.

Latin America faces the twin challenges of achieving economic growth and reducing extreme inequality. Notwithstanding the heterogeneity among Latin American countries (LACs), most of them exhibit both: (i) low average Gross Domestic Product (GDP) growth; and (ii) increased inequality during the 1980s. This long period includes the 'lost decade,' when outcomes in both variables were evidently negative. These negative trends have persisted since the early 1990s, in the period of intense reforms under the Washington consensus. The development gap (difference in GDP per capita or per worker between rich countries and LACs) and the equity gap have broadened in this period. The report evaluate: (a) the macroeconomic environment in which agents make their decisions (usually in LACs, under an economic activity operating significantly below potential GDP, with outlier macro-prices, and fluctuating aggregate demand); (b) features of financial reforms (usually intensive in short-term segments and weak financing of risk and long-term financing), and their implications for capital formation and the distribution of opportunities in the domestic economy; (c) features of trade reforms (intensive in resource-based exports but low total output of tradable); and (d) the distribution of productivities, which is closely linked to the narrow space granted for the development of small and medium enterprises (SMEs).

This paper analyzes the relations between leadership, the policy making process, policies and institutions, and development results in Chile. It starts with a stylized model for the dynamics of development that derives a Kuznets type relation between growth and distribution of income, determined by the quality of leadership, the policy making process, institutions, and policies. This framework is applied to Chile, identifying the features of the policy making process and leadership that allowed for continuation of growth enhancing reform, with a stronger focus on equity goals, since the transition to democracy. As a result of three decades of reforms, Chile has recorded a quantum leap in economic growth, which is traced down to specific reforms. Yet Chile's equity experience is much more mixed: poverty has declined massively but income remains highly concentrated, a likely result of shortcomings in the quality of education and in labor markets. The paper reviews the major risks to the country's future development pace and points out the main reform challenges faced by policy makers.

The literature on the economics of happiness in developed economies finds discrepancies between reported measures of well-being and income measures. One is the so-called Easterlin paradox: that average happiness levels do not increase as countries grow wealthier. This article explores how that paradox and survey research on reported wellbeing in general can provide insights into the gaps between standard measures of economic development and individual assessments of welfare. Analysis of research on reported wellbeing in Latin America and Russia finds notable discrepancies between respondent assessments of their own wellbeing and income or expenditure based measures. Accepting a wide margin for error in both types of measures, the article posits that taking such discrepancies into account may improve the understanding of development outcomes by providing a broader view on wellbeing than do income or expenditure based measures alone. It suggests particular areas where research on reported well-being has the most potential to contribute. Yet the article also notes that some interpretations of happiness research psychologist set point theory, in particular may be quite limited in their application to development questions and cautions against the direct translation of results of happiness surveys into policy recommendations.

This article presents data on the evolution of top incomes and wages for 1922-2000 in India using individual tax return data. The data show that the shares of the top 0.01 percent, 0.1 percent, and 1 percent in total income shrank substantially from the 1950s to the early to mid-1980s but then rose again, so that today these shares are only slightly below what they were in the 1920s and 1930s. This U-shaped pattern is broadly consistent with the evolution of economic policy in India: from the 1950s to the early to mid-1980s was a period of ''socialist'' policies in India, whereas the subsequent period, starting with the rise of Rajiv Gandhi, saw a gradual shift toward more pro-business policies. Although the initial share of the top income group was small, the fact that the rich were getting richer had a nontrivial impact on the overall income distribution. Although the impact is not large enough to fully explain the gap observed during the 1990s between average consumption growths shown in National Sample Survey based data and the national accounts based data, it is sufficiently large to explain a non-negligible part of it.

Most researchers examining poverty and multilateral trade liberalization have had to examine average, or per capita effects, suggesting that if per capita real income rises, poverty will fall. This inference can be misleading. Combining results from a new international cross-section consumption analysis with earnings data from household surveys, this article analyzes the implications of multilateral trade liberalization for poverty in Indonesia. It finds that the aggregate reduction in Indonesia's national poverty headcount following global trade liberalization masks a more complex set of impacts across groups. In the short run the poverty headcount rises slightly for self-employed agricultural households, as agricultural profits fail to keep up with increases in consumer prices. In the long run the poverty headcount falls for all earnings strata, as increased demand for unskilled workers lifts incomes for the formerly self-employed, some of whom move into the wage labor market. A decomposition of the poverty changes in Indonesia associated with different countries' trade policies finds that reform in other countries leads to a reduction in poverty in Indonesia but that liberalization of Indonesia's trade policies leads to an increase. The method used here can be readily extended to any of the other 13 countries in the sample.

The effects of globalization on income distribution within rich and poor countries are a matter of controversy. While international trade theory in its most abstract formulation implies that increased trade and foreign investment should make income distribution more equal in poor countries and less equal in rich countries, finding these effects has proved elusive. The paper presents another attempt to discern the effects of globalization by using the new data derived directly from household surveys. The paper looks at the impact of openness (trade/GDP ratio) and direct foreign investment on relative income shares across the entire income distribution. In contrast to what one would expect from theory, we find strong evidence that at low average income level, it is the rich who benefit from openness. As income level rises, that is around the income level of $5-7,000 per capita at international prices, the situation changes and it is the relative income of the poor and the middle class that rises compared to the rich. It seems that openness makes income distribution worse before making it better—or differently that the effect of openness on on income distribution depends on country’s average income level.