Rafael E. De Hoyos

Poverty Effects of Higher Food Prices: A Global Perspective

The spike in food prices between 2005 and the first half of 2008 has highlighted the vulnerabilities of poor consumers to higher prices of agricultural goods and generated calls for massive policy action. This paper provides a formal assessment of the direct and indirect impacts of higher prices on global poverty using a representative sample of 63 to 93 percent of the population of the developing world. To assess the direct effects, the paper uses domestic food consumer price data between January 2005 and December 2007--when the relative price of food rose by an average of 5.6 percent --to find that the implied increase in the extreme poverty headcount at the global level is 1.7 percentage points, with significant regional variation. To take the second-order effects into account, the paper links household survey data with a global general equilibrium model, finding that a 5.5 percent increase in agricultural prices (due to rising demand for first-generation biofuels) could raise global poverty in 2010 by 0.6 percentage points at the extreme poverty line and 0.9 percentage points at the moderate poverty line. Poverty increases at the regional level vary substantially, with nearly all of the increase in extreme poverty occurring in South Asia and Sub-Saharan Africa.

Global Growth and Distribution: Are China and India Reshaping the World?

Over the past 20 years, aggregate measures of global inequality have changed little even if significant structural changes have been observed. High growth rates of China and India lifted millions out of poverty, while the stagnation in many African countries caused them to fall behind. Using the World Banks LINKAGE global general equilibrium model and the newly developed Global Income Distribution Dynamics (GIDD) tool, this paper assesses the distribution and poverty effects of a scenario where these trends continue in the future. Even by anticipating a deceleration, growth in China and India is a key force behind the expected convergence of per-capita incomes at the global level. Millions of Chinese and Indian consumers will enter into a rapidly emerging global middle class-a group of people who can afford, and demand access to, the standards of living previously reserved mainly for the residents of developed countries. Notwithstanding these positive developments, fast growth is often characterized by high urbanization and growing demand for skills, both of which result in widening of income distribution within countries. These opposing distributional effects highlight the importance of analyzing global disparities by taking into account - as the GIDD does - income dynamics between and within countries.

Is the Developing World Catching up? Global Convergence and National Rising Dispersion

The present study uses the GIDD, a CGE-microsimulation model for Global Income Distribution Dynamics, to understand the ex-ante dynamics of global income distribution. Three main robust results emerge. First, under a set of realistic assumptions, there will be a reduction in global income inequality by 2030. This potential reduction can be fully accounted for by the projected convergence in average incomes across countries, with poor and populous countries growing faster than the rest of the world. Second, this convergence process will be accompanied by a widening of income distribution in two-thirds of the developing countries; the main cause being increasing skill premia. Third, a trend that may counter-balance the potential anti-globalization sentiment is the emergence of a global middle class: a group of consumers who demand access to, and have the means to purchase, international goods and services. The results show that the share of these consumers in the global population is likely to more than double in the next 20 years. These ex-ante trends in global income distribution suggest that the mid-1990s could be seen as a turning point after which global inequality began showing a negative tendency.

Global income distribution and poverty in the absence of agricultural distortions

This paper assesses the potential impacts of the removal of agriculture trade distortions using a newly developed dataset and methodological approach for evaluating the global poverty and inequality effects of policy reforms. It finds that liberalization of agriculture and food could increase global extreme poverty (US

Accounting for Mexican Income Inequality During the 1990s

1 a day) by 0.2 percent and lower moderate poverty (US

Global Growth and Distribution: China, India, and the Emergence of a Global Middle Class

2 a day) by 0.3 percent. Beneath these small aggregate changes, most countries witness a substantial reduction in poverty while South Asia-where half of the worlds poor reside-experiences an increase in extreme poverty incidence due to high rates of protection afforded to unskilled-intensive agricultural sectors. The distributional changes are likely to be mild, but exhibit a strong regional pattern. Inequality is likely to fall in regions such as Latin America, which are characterized by high initial inequality, and rise in regions like South Asia, characterized by low initial inequality.

Free Trade in Agriculture and Global Poverty

The author implements several inequality decomposition methods to measure the extent to which total household income disparities can be attributable to sectoral asymmetries and differences in skill endowments. The results show that at least half of total household inequality in Mexico is attributable to incomes derived from entrepreneurial activities, an income source rarely scrutinized in the inequality literature. He shows that education (skills) endowments are unevenly distributed among the Mexican population, with positive shifts in the market returns to schooling associated with increases in inequality. Asymmetries in the allocation of education explain around 20 percent of overall household income disparities in Mexico during the 1990s. Moreover, the proportion of inequality attributable to education endowments increases during stable periods and reduces during the crisis. This pattern is explained by shifts in returns to schooling rather than changes in the distribution of skills. Applying the same techniques to decompose within-sector income differences, the author finds that skill endowments can account for as much as 25 percent of earnings disparities but as little as 5 percent of dispersion in other income sources.

The Heterogeneous Effect of Information on Student Performance: Evidence from a Randomized Control Trial in Mexico

Over the past two decades, global inequality changed little despite significant structural shifts. Sustained growth in China and India lifted millions out of poverty, while many African countries fell behind. This paper assesses the distribution effects of a continuation of these trends. Growth in China and India will still drive the convergence of per capita incomes at the global level. Millions of Chinese and Indian consumers will join the global middle class. However, these positive developments will be somewhat offset by widening income disparities within countries, as fast growth is often characterized by high urbanization and growing demand for skills.

Understanding the trends in learning outcomes in Argentina, 2000 to 2012

This paper assesses the potential impacts of the removal of agriculture trade distortions using a newly developed data set and methodological approach for evaluating the global poverty and inequality effects of policy reforms. It finds that liberalisation of agriculture and food could increase global extreme poverty by 0.2 per cent and lower moderate poverty by 0.3 per cent. Beneath these small aggregate changes, most countries witness a substantial reduction in poverty, while South Asia – where half of the world’s poor reside – experiences an increase in extreme poverty incidence owing to high rates of protection afforded to unskilled‐intensive agricultural sectors. The distributional changes are likely to be mild but exhibit a strong regional pattern. Inequality is likely to fall in regions such as Latin America, which are characterised by high initial inequality, and rise in regions like South Asia, characterised by low initial inequality.

Global Poverty and Distributional Impacts of Agricultural Distortions

A randomized control trial was conducted to study whether providing 10th grade students with information about the returns to upper secondary and tertiary education, and a source of financial aid for tertiary education, can contribute to improve student performance. The study finds that the intervention had no effects on the probability of taking a 12th grade national standardized exam three years after, a proxy for on-time high school completion, but a positive and significant impact on learning outcomes and self-reported measures of effort. The effects are larger for girls and students from households with a relatively high income. These findings are consistent with a simple model where time discount determines the increase in effort and only students with adequate initial conditions are able to translate increased effort into better outcomes.