In this paper, we review the recent literature on global interpersonal income inequality. While all estimates agree that the level is very high, with a Gini of between 0.630 and 0.686 in the 1990s, there is no consensus regarding the direction of change. We discuss methodological issues, including the use of national accounts versus survey-based estimates of mean income (or consumption) and the choice of purchasing power parity exchange rates. Findings of a rise or fall in global income inequality are not robust across different estimation methods and datasets. Given the diversity of estimates and various sources of uncertainty, including gaps and errors in the underlying data, we conclude there is insufficient evidence to determine the direction of change in global interpersonal inequality in recent decades.

/pdf/what-do-we-know-about-global-income-inequality-2j85qo0c1h.pdf

What Do We Know about Global Income Inequality

With the 14 members of the Southern African Development Community (SADC) having set the objective of adopting a common currency for the year 2018, an expanding empirical literature has emerged evaluating the benefits and costs of a common-currency area in Southern Africa. This paper reviews that literature, focusing on two categories of studies: (1) those that assume that a country's characteristics are invariant to the adoption of a common currency and (2) those that assume that a monetary union alters an economy's structure, resulting in trade creation and credibility gains. The literature reviewed suggests that a relatively small group of countries, typically including South Africa, satisfies the criteria necessary for monetary unification. The literature also suggests that, in a monetary union comprising all SADC countries and a regional central bank that sets monetary policy to reflect the average economic conditions (e.g. fiscal balances) in the region, the potential losses (i.e. higher inflation) from giving up an existing credible national central bank, a relevant consideration for South Africa, could outweigh any potential benefits of trade creation resulting from a common currency.

/pdf/the-benefits-and-costs-of-monetary-union-in-southern-africa-uv8xbi0olv.pdf

The benefits and costs of monetary union in southern africa: a critical survey of the literature

Purpose – In today's increasingly globalized world, foreign direct investment (FDI) is a hotbed for discussion. Numerous studies have been undertaken regarding FDI, its determinants and benefits, but very few works provide importance to the effect of political risk on the inflow of FDI. Some papers introduce institutional or governance issues in determining FDI inflow, but a comprehensive framework in this respect is non-existent. With this end in view, the authors take 146 countries worldwide over a period of 1984-2009 and then classify countries as OECD or non-OECD members to see whether there is any difference in the nature of the effect. The study keeps other possible determinants of FDI – market size, growth rate of real GDP, trade openness, infrastructural facilities as control variables while considering the effect of underlying political risk factors in deterring the FDI. Design/methodology/approach – This paper looks at the effect of political risk on FDI by using a systematic approach of factor ...

Does political risk deter FDI inflow

This article provides a new benchmark estimate of comparative Germany/U.K. labor productivity in manufacturing for circa 1907, and experiments with alternative German manufacturing production indices for time series projection from a circa 1935 benchmark. A consistent picture of broadly similar levels of manufacturing labor productivity in Britain and Germany throughout the period 1871–1938 is established. We also show that a substantial German productivity lead had already emerged in heavy industry by 1907, but was offset by a substantial British productivity lead in light industry. For the pre-1914 period, an additional check is provided using nominal income-based estimates.

/pdf/comparative-productivity-in-british-and-german-manufacturing-1ctft56yfj.pdf

Comparative Productivity in British and German Manufacturing Before World War II: Reconciling Direct Benchmark Estimates and Time Series Projections

A time series is remapped onto an entropy concept, based on the Theil index. The Manhattan distance between these surrogate series is calculated, and contrasted to the usual correlation distance measure. The idea is applied to several Gross Domestic Product (relative increments) of rich countries. Such distances are calculated for various time window sizes. The role of time averaging in such finite size windows is discussed. We construct the locally minimum spanning tree (LMST) corresponding to the distance matrix. Another hierarchical network structure (Unidirectional Minimal Length Path) is compared with the LMST for confirming that the mean distance between the most developed countries on different networks actually decreases in time, — which we consider as a proof of economy globalization. It is stressed that this entropy distance measure seems more suitable in detecting some “phase transition” in time series, like a globalization process than the usual correlation based measure.

Globalization — Entropy unification through the Theil index

This paper examines alternative approaches to multilateral comparisons based on spatial chains. The ground covered includes a review of the consistency problem for countries with multiple-benchmarks and a discussion of what might give rise to it. While much of our recent work has been with respect to the Penn World Table (PWT), most of this paper will be concerned with benchmark comparisons. In particular we argue that serious consideration be given to spatial chaining as a method of multilateral comparison, but there still remain major problems to solve. The case we make is as much empirical as it is methodological. Our application is to the 115 country 1996 reduced benchmark data. For this data set, we examine spatial linking based upon the spanning tree approach of Robert Hill, but using both price similarity as well as the Paasche-Laspeyres spread as criteria. We go on to describe how we might extend this benchmark over time and space along the lines of PWT.

Price structures, the quality factor, and chaining

/pdf/use-of-country-purchasing-power-parities-for-international-4v0mvdejpn.pdf

Use of Country Purchasing Power Parities for International Comparisons of Poverty Levels: Potential and Limitations

/pdf/use-of-country-purchasing-power-parities-for-international-40c75cyave.pdf

Use of Country Purchasing Power Parities for International Comparisons of Poverty Levels

This report is a product of the seventh meeting of the 2011 ICP Technical Advisory Group (TAG) that was held from September 17 to 18, 2012 at the World Bank in Washington, DC. TAG discussions have often focused on the wide economic differences between countries and regions and how best to put together countries within regions and the world. In the discussions it is often suggested that regions are more homogeneous than the world. This note examines one method that has been mentioned for dealing with this issue, namely weighing the various Fisher indexes that go into the generalized Elteto-Koves-Szulc (GEKS) method estimation depending on how disparate are the two components, the Paasche and Laspeyres price indexes. The method adopted by the Technical Advisory Group on the 2011 ICP is the CAR method, standing for Country Aggregation and Redistribution. The CAR approach maintains the regional shares from a global GEKS but controls the distribution of that total according to the regional GEKS. Use of SIM-weighted GEKS on the Fisher binaries is a transparent and operational method, and provides measurable differences for comparisons. This report argues that it moves the estimates in the right direction and in general this is a good thing. The effect of SIM-weighting is generally less than 1 percent on the GEKS estimate for a country compared to a base GEKS with a few countries over 2 percent. Since the effect of SIM-weighting is not large is it worth another to the estimation? The reports suggests yes both because it moves in the right direction, but also because of the relatively large differences introduced in the CAR approach, in some countries more than 5 percent compared to a global GEKS. It is the authors' recommendation that using SIM-weighted GEKS in conjunction with the CAR approach will reduce some of the larger differences associated with the CAR approach at least for 2005. At a minimum this seems like a direction that would justify further study.

/pdf/should-the-regions-and-the-global-office-use-weighted-geks-48ivt6241u.pdf

Bettina Aten

Papers

Price structures, the quality factor, and chaining

Use of Country Purchasing Power Parities for International Comparisons of Poverty Levels: Potential and Limitations

Use of Country Purchasing Power Parities for International Comparisons of Poverty Levels

Should the regions and the global office use weighted GEKS