Hernan Winkler

Is Labor Income Responsible for Poverty Reduction? A Decomposition Approach

Demographics, labor income, public transfers, or remittances: Which factor contributes the most to observed reductions in poverty? Using counterfactual simulations, this paper accounts for the contribution labor income has made to the observed changes in poverty over the past decade for a set of 16 countries that have experienced substantial declines in poverty. In contrast to methods that focus on aggregate summary statistics, the analysis generates entire counterfactual distributions that allow assessing the contributions of different factors to observed distributional changes. Decompositions across all possible paths are calculated so the estimates are not subject to path-dependence. The analysis shows that for most countries in the sample, labor income is the most important contributor to changes in poverty. In ten of the countries, labor income explains more than half of the change in moderate poverty; in another four, it accounts for more than 40 percent of the reduction in poverty. Although public and private transfers were relatively more important in explaining the reduction in extreme poverty, more and better-paying jobs were the key factors behind poverty reduction over the past decade.

What is behind the decline in poverty since 2000 ? evidence from Bangladesh, Peru and Thailand

This paper quantifies the contributions of different factors to poverty reduction observed in Bangladesh, Peru and Thailand over the last decade. In contrast to methods that focus on aggregate summary statistics, the method adopted here generates entire counterfactual distributions to account for the contributions of demographics and income from labor and non-labor sources in explaining poverty reduction. The authors find that the most important contributor was the growth in labor income, mostly in the form of farm income in Bangladesh and Thailand and non-farm income in the case of Peru. This growth in labor incomes was driven by higher returns to individual and household endowments, pointing to increases in productivity and real wages as the driving force behind poverty declines. Lower dependency ratios also helped to reduce poverty, particularly in Bangladesh. Non-labor income contributed as well, albeit to a smaller extent, in the form of international remittances in the case of Bangladesh and through public and private transfers in Peru and Thailand. Transfers are more important in explaining the reduction in extreme compared with moderate poverty.

Reaping Digital Dividends

From East to West, the economies of Europe and Central Asia (ECA) are not taking full advantage of the internet to foster economic growth and job creation. The residents of Central Asia and the South Caucasus pay some of the highest prices in the world for internet connections that are slow and unreliable. In contrast, Europe enjoys some of the world’s fastest and affordable internet services. However, its firms and individuals are not fully exploiting the internet to achieve higher productivity growth as well as more and better jobs. Reaping Digital Dividends investigates the barriers that are holding back the broader adoption of the internet in ECA. The report identifies the main bottlenecks and provides policy recommendations tailored to economies at varying levels of digital development. It concludes that policies to increase internet access are necessary but not sufficient. Policies to foster competition, international trade and skills supply, as well as adapting regulations to the changing business environment and labor markets, will also be necessary. In other words, Reaping Digital Dividends not only requires better connectivity, but also complementary factors that allow governments, firms and individuals to make the most out of it.

Fiscal Policy Issues in the Aging Societies

Aging may be one of the most far-reaching processes defining the economic, fiscal, and social changes societies are likely to experience over the next 40 years. The demographic consequences of aging will have a dramatic impact on labor markets, economic growth, social structures — and government budgets. These issues have gained urgency after the second largest global recession in the past 100 years. Based on a broad comparative analysis of countries that include the EU and non-EU European and Central Asian countries, as well as several case studies and model simulations, the paper seeks to provide broad answers — tailored in part to distinct groups of countries according to their aging-fiscal profiles –– to major questions facing governments’ budgets in aging societies: What are the fiscal-aging profiles of Western European, emerging European, and Central Asian countries? In other words, how good or bad is their fiscal situation — “initial conditions” — in view of their emerging aging-related problems? What kind of public spending pressures are likely to emerge in the coming decades, and what will be their relative importance? How do countries compare in terms of the possible impacts of aging on growth and long-term debt sustainability? What can be learned from in-depth and comparative case studies of aging, fiscal sustainability, and fiscal reform? Are there good-practice examples — countries doing things right at the right time — that may offer lessons for the others? And, perhaps most important, given the need for long-term fiscal consolidation for many countries, what kind of revenue and expenditure policy agendas are likely to emerge to mitigate the effects of aging? A key policy conclusion is that countries should aim for early rather than delayed reforms dealing with long-term aging pressures. The urgency is accentuated by the debt situations and/or adverse debt and demographic dynamics in almost all countries but also by the evolving voter preferences. As societies age and voting preferences increasingly reflect the political will of the older population, it will become more difficult to enact the necessary reforms ensuring social and fiscal sustainability.

How is the Internet Changing Labor Market Arrangements? Evidence from Telecommunications Reforms in Europe

This paper exploits variations in the timing of telecommunications reforms across Europe to analyze the relationship between the rise of alternative work arrangements and the emergence of the Internet. The paper evaluates whether sectors that are technologically more dependent on information and communications technologies experienced disproportionately larger changes in their employment outcomes after telecommunications reforms were introduced. The main results point to a disproportionate increase in total employment, part-time work, and home-based work among information and communications technologies–intensive sectors after the implementation of telecommunications reforms. The analysis does not find a link between the incidence of temporary employment, self-employment, second job holding, and telecommunications reforms. The main results are robust to several specifications.

Are Immigration Inflows Good for Business? The Role of Informality in Developing Countries

This article examines the effects of large inflows of internally displaced persons (IDP), who are primarily absorbed by the informal sector, on the behavior of formal manufacturing firms in Colombia. To identify causal effects, we employ annual firm-level panel data between 1995 and 2010 and exploit the fact that, when conflict intensifies, forcefully displaced individuals tend to migrate to municipalities where people from their origin locations settled earlier. We find that large inflows of IDP induce sizable negative effects on the intensive and extensive margins of production of formal firms. These effects are stronger for firms operating in sectors that face a stronger competition from the informal economy.

Will Aging Societies Become More Averse to Open Immigration Policies? Evidence Across Countries

In aging societies, the elderly will represent an increasingly higher share of the voting population and they will potentially play a more important role in shaping the policy agenda. Using household surveys for twenty-four countries, this paper investigates why the elderly are more averse to open immigration policies than their younger peers. We find that the negative correlation between age and pro-immigration attitudes is mostly explained by a cohort or generational effect. After controlling for birth cohort, the effect of age on pro-immigration attitudes is either positive or zero in most of the countries of our sample. We also find that people are more likely become more pro-immigration over the life-cycle in economies where older individuals participate more actively in the labor market. These results are consistent with the degree of substitutability between immigrant and native workers decreasing with natives’ age. Our estimates suggest that aging societies will tend to become less averse to open immigration regimes over time.