Surjit Bhalla, Karan Bhasin, and Mr. Arvind Virmani
The paper presents estimates of poverty [extreme poverty PPP$1.9 and PPP$3.2] and consumption inequality in India for each of the years 2004-5 through the pandemic year 2020-21. These estimates include, for the first time, the effect of in-kind food subsides on poverty and inequality. Extreme poverty was as low as 0.8 percent in the pre-pandemic year 2019, and food transfers were instrumental in ensuring that it remained at that low level in pandemic year 2020. Post-food subsidy inequality at .294 is now very close to its lowest level 0.284 observed in 1993/94.
Katharina Bergant, Miss Anke Weber, and Andrea Medici
Using micro-data from household expenditure surveys, we document the evolution of consumption poverty in the United States over the last four decades. Employing a price index that appears appropriate for low income households, we show that poverty has not declined materially since the 1980s and even increased for the young. We then analyze which social and economic factors help explain the extent of poverty in the U.S. using probit, tobit, and machine learning techniques. Our results are threefold. First, we identify the poor as more likely to be minorities, without a college education, never married, and living in the Midwest. Second, the importance of some factors, such as race and ethnicity, for determining poverty has declined over the last decades but they remain significant. Third, we find that social and economic factors can only partially capture the likelihood of being poor, pointing to the possibility that random factors (“bad luck”) could play a significant role.
Mrs. Swarnali A Hannan, Juan Pablo Cuesta Aguirre, and David Bartolini
Poverty in Mexico was high before the COVID-19 pandemic and has been exacerbated by the pandemic, with significant variation across states. Education losses from the pandemic are likely to be large and worsen pre-existing disparities; unless mitigated soon, they could contribute to heightened scarring over the medium term. Using state-level and cross-country comparisons, this paper reviews key social programs as well as priorities in education and health. It finds that higher spending and improved design of social programs (e.g., better targeting) would reduce socioeconomic gaps, mitigate scarring risks, and foster inclusive growth.
Mr. Christian Bogmans, Mr. Andrea Pescatori, and Ervin Prifti
We study how two aspects of food insecurity - caloric insufficiency and diet composition - are affected by aggregate economic fluctuations. The use of cross-country panel data allows us to adopt a global prospective on the identification of the macroeconomic determinants of food insecurity. Income shocks are the most relevant driver of food insecurity, displaying high elasticities at the early stages of economic development. The role of food price shocks is more limited. Social protection has a direct effect and mitigates the impact of income shocks. Effects are highly heterogeneous across a range of structural characteristics of the economy, highlighting the role of distributional aspects and of food import dependency.
Juan Pablo Cuesta Aguirre and Mrs. Swarnali A Hannan
To shed light on the possible scarring effects from Covid-19, this paper studies the economic effects of five past pandemics using local projections on a sample of fifty-five countries over 1990-2019. The findings reveal that pandemics have detrimental medium-term effects on output, unemployment, poverty, and inequality. However, policies can go a long way toward alleviating suffering and fostering an inclusive recovery. The adverse output effects are limited for countries that provided relatively greater fiscal support. The increases in unemployment, poverty, and inequality are likewise lower for countries with relatively greater fiscal support and relatively stronger initial conditions (as defined by higher formality, family benefits, and health spending per capita).
Johannes Emmerling, Davide Furceri, Francisco Líbano Monteiro, Mr. Prakash Loungani, Mr. Jonathan David Ostry, Pietro Pizzuto, and Massimo Tavoni
COVID-19 has had a disruptive economic impact in 2020, but how long its impact will persist remains unclear. We offer a prognosis based on an analysis of the effects of five previous major epidemics in this century. We find that these pandemics led to significant and persistent reductions in disposable income, along with increases in unemployment, income inequality and public debt-to-GDP ratios. Energy use and CO2 emissions dropped, but mostly because of the persistent decline in the level of economic activity rather than structural changes in the energy sector. Applying our empirical estimates to project the impact of COVID-19, we foresee significant scarring in economic performance and income distribution through 2025, which be associated with an increase in poverty of about 75 million people. Policy responses more effective than those in the past would be required to forestall these outcomes.
Mr. Ravi Balakrishnan, Sandra Lizarazo, Marika Santoro, Mr. Frederik G Toscani, and Mr. Mauricio Vargas
Over the past decades, inequality has risen not just in advanced economies but also in many emerging market and developing economies, becoming one of the key global policy challenges. And throughout the 20th century, Latin America was associated with some of the world’s highest levels of inequality. Yet something interesting happened in the first decade and a half of the 21st century. Latin America was the only region in the World to have experienced significant declines in inequality in that period. Poverty also fell in Latin America, although this was replicated in other regions, and Latin America started from a relatively low base. Starting around 2014, however, and even before the COVID-19 pandemic hit, poverty and inequality gains had already slowed in Latin America and, in some cases, gone into reverse. And the COVID-19 shock, which is still playing out, is likely to dramatically worsen short-term poverty and inequality dynamics. Against this background, this departmental paper investigates the link between commodity prices, and poverty and inequality developments in Latin America.
Ms. Valerie Cerra, Mr. Ruy Lama, and Norman Loayza
Is there a tradeoff between raising growth and reducing inequality and poverty? This paper reviews the theoretical and empirical literature on the complex links between growth, inequality, and poverty, with causation going in both directions. The evidence suggests that growth can be effective in reducing poverty, but its impact on inequality is ambiguous and depends on the underlying sources of growth. The impact of poverty and inequality on growth is likewise ambiguous, as several channels mediate the relationship. But most plausible mechanisms suggest that poverty and inequality reduce growth, at least in the long run. Policies play a role in shaping these relationships and those designed to improve equality of opportunity can simultaneously improve inclusiveness and growth.
International Monetary Fund. External Relations Dept.
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