Tag: Income

New social contract

Gaps in the trap: Neglected politics in middle-income trap analysis

By Richard F. Doner, Professor Emeritus, Department of Political Science, Emory University1

Scholars, advisors and policymakers alike have paid extensive attention to the middle-income trap. Despite some differences in definition, most agree that the “trap” refers to various conditions that have discouraged many middle-income countries from ascending to high-income status. Cross-national economic convergence has been nowhere near what was expected given middle-income countries’ access to advanced technologies and market opportunities.

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Development Matters
New social contract

Trapped in the middle? Developmental challenges for middle-income countries

By José Antonio Alonso, Professor at Universidad Complutense and member of the Spanish Co-operation Council and José Antonio Ocampo, Professor at Columbia University, and former UN Under-Secretary-General for Economic and Social Affairs and Finance Minister of Colombia

The intense growth enjoyed by a group of emerging economies during the last two decades drove some analysts to predict the beginning of a new stage of generalised economic convergence. In their vision, more and more middle-income countries (MICs) were likely to reach high-income status in the near future, taking advantage of the new opportunities provided by access to financial markets, information technology and international trade, including the development of global value chains.

Unfortunately, data have not confirmed these optimist predictions. Actually, up to now, economic convergence has been a selective opportunity for a small group of countries, and rather a generalised tendency for the whole group of MICs. Moreover, there is growing evidence that trespassing the low-income threshold and achieving middle-income status is not enough for countries to converge toward high-income levels. Few MICs have successfully completed that transition in recent decades, with the majority getting stuck in the middle-income group, thus facing what has come to be called the middle-income trap.

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Lia Beyeler
Building resilience, Covid-19, Policy

Is there any silver lining in the COVID-19 crisis?

By Bert Hofman, Director, East Asian Institute and Professor in Practice Lee Kuan Yew School of Public Policy, National University Singapore

This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.

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The economic devastation that COVID-19 leaves in its trail is astonishing. The IMF projects that the world will fall into a deep recession, deeper than the one that followed the Global Financial Crisis.  Despite the unprecedented policy response that we have already seen, including a tripling of average fiscal deficits to almost 10 percent of GDP, and monetary loosening in similar orders of magnitude, world GDP is projected to decline by 3 percent in 2020, double the decline of 2009.

The IMF projects that low income countries would barely grow this year, only 0.4 percent compared to 5 percent last year, and 4.7 percentage points lower than projected only in January. Emerging and developing economies as a whole fare even worse: GDP is projected to decline with one percent in 2020, compared to 3.7 percent growth last year.  And all of that could be worse: the IMF’s downside scenario is far worse. Continue reading “Is there any silver lining in the COVID-19 crisis?”

Development Matters
Covid-19, Employment, New social contract, Social Protection

The COVID-19 crisis: income support to informal workers is necessary and possible

By Laura Alfers, Director, Social Protection Programme, WIEGO, Rachel Moussié, Deputy Director, Social Protection Programme, WIEGO and Jenna Harvey, Global Focal Cities Coordinator, WIEGO

This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.

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Photo: Shutterstock

Income recovery in the informal economy will require broad and longer-term support

Juana Corman wakes at 2:00 a.m., as she has for decades, to travel across town to the distribution centre where she picks up stacks of newspapers to sell. Normally, she would sell from her dedicated kiosk to pedestrians on Lima’s busy streets, but under Peru’s mandatory stay-at-home order, her work has changed. Now, she sells the daily paper house-to-house – delivering critical information to a city on edge. In one respect, Juana Corman is more fortunate than many other informal workers in the city – as an essential worker she is able to continue working. However, selling door to door has meant a significant reduction in earnings at the same time as her costs have increased due to limited public transport and the need to purchase protective equipment. Continue reading “The COVID-19 crisis: income support to informal workers is necessary and possible”

Development Matters3 Comments
Policy

Technological change raises the stakes for action to leave no one behind

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By Achim Steiner, UNDP Administrator

To read more about this topic, check out the upcoming release
of the Development Co-operation Report 2018: Joining Forces to Leave No One Behind on 11 December 2018

growth-technology-people.jpgThe 2030 Agenda presents a historic opportunity to set the world on track to a sustainable future. In twelve years’ time, a litmus test for its success will be: have we made good on the promise to ‘leave no one behind’? The answer will depend, in some measure, on our responses to the fourth industrial revolution.

The speed and ubiquity of technological change offers unparalleled opportunities for sustainable development, but it also comes with the risk of rising inequalities within and between countries. It is up to policy makers to leverage this transformation for good, and to mitigate their risks.

Artificial intelligence can improve the quality and reach of health care with half of the world’s population still not having access to essential health services. Digital technologies can boost agricultural productivity. Satellite imagery can help combat deforestation. Big data analytics can identify needs and help track progress in real time. Drones can deliver essential supplies. And digital finance can enable new models to deliver basic services. Continue reading “Technological change raises the stakes for action to leave no one behind”

Development Matters
Policy

Who will drive consumer spending in the next decade?

By Kristofer Hamel, Chief Operating Officer, World Data Lab, and Homi Kharas, Interim Vice President, Brookings; Senior Economic Advisor World Data Lab1 

shoppingIn October 2018, the international community crossed a historic threshold: the majority of humanity no longer lives in or near poverty. Now and continuing into the foreseeable future, most people on Earth are middle class or rich. This tipping point is of interest to both the research community as well as global and regional companies searching for new markets.

But who exactly are these new middle-class consumers, and how will their profile change over the next decade?

Answering this question begins with an understanding of household classifications. Our projections (all per person spending according to 2011 purchasing power parity) designate households as those in extreme poverty (households spending below USD 1.90 per day), those in the lower middle class (households spending USD 11-50 per day) and those in the upper middle class (households spending USD 50-110 per day). Two other groups –households “vulnerable” to falling back into poverty as well as the “rich” who sit at the top end of the distribution – round out our classifications.
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Development Matters11 Comments
Latin America and the Caribbean, New social contract

Informal is normal in Latin America: taxes matter

By Juan Carlos Benítez, Economist at the Latin American and Caribbean Unit, and Angel Melguizo, Head of the Latin American and Caribbean Unit, at the Organisation for Economic Co-operation and Development (OECD)

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Informality equals vulnerability. In emerging economies and particularly in Latin America, informal is normal. On average, 55% of workers in the region did not contribute to pension or healthcare programmes in 2013. Although informality rates vary significantly across countries (Figure 1), a common feature of informality is its large prevalence amongst the poor and low-middle income workers (e.g. Jutting and De Laiglesia, 2009). On average, 85% and 73% of households in the lowest earning quintiles do not have any member contributing to social security schemes. Furthermore, informality is “one of the most striking differences, within the middle sectors, between the vulnerable population and the consolidated middle class” (Lustig and Melguizo, 2015).

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Development Matters
Latin America and the Caribbean, New social contract

How middle class are middle-income households in Latin America?

By Ángel Melguizo (OECD Development Centre) and Nora Lustig (Tulane University)

On labour informality and its causes

 One of the most important achievements of the recent period of economic expansion in Latin America has been the substantial reduction of poverty and the surge of an emerging middle class. According to World Bank estimates (Ferreira et al, 2013), in 2009 the Latin American population with a daily income of between 4 and 50 dollars a day (in parity of purchasing power) represents 68% in the region today, compared with 29% who still are moderate poverty. These ‘middle sectors’ are composed of 38% belonging to a vulnerable population, which has between 4 and 10 dollars a day, and 30% middle class, between 10 and 50 dollars. Continue reading “How middle class are middle-income households in Latin America?”

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Shifting wealth

How to continue the shifting wealth momentum

By Carl Dahlman, Head of the Thematic Division and Head of Global Development Research at the OECD Development Centre and Martin Wermelinger, Economist at the OECD Development Centre Strong growth over much of the past decade has substantially boosted developing countries’ share of the global economy and accelerated per capita income convergence with richer countries. We call this process “shifting wealth.” However, productivity is still lagging … Continue reading How to continue the shifting wealth momentum

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Social Protection

Social protection: Worldwide priority, local solutions

By Alexandre Kolev, Head of the social cohesion unit at the OECD Development Centre

The past decades have seen the dramatic expansion of social protection programmes in developing countries. Today, about 2 billion people in developing countries have access to social safety net programmes. Virtually all countries, even some in fragile contexts, have interventions in place that aim to address consumption deficits, and some middle income countries, especially in Latin America, have introduced cash transfers to encourage human capital development. Conditional cash transfers now exist in 64 countries, a dramatic increase from 2 countries in 1997 and 27 in 2008.

The recent rise in social protection has been fuelled by overwhelming evidence that social protection schemes deliver real results. Numerous evaluations around the world — 86 alone between 2011 and 2015 — show positive impacts, including a reduction in poverty by 50% for the most successful cases, increased household income and consumption, better health and education, and increased investment in productive assets and savings. Continue reading “Social protection: Worldwide priority, local solutions”

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