Job Market Paper
Work in Progress
“Dharma in General Equilibrium: Caste and Occupational Choice in India,” with Guilhem Cassan and Daniel Keniston.
“Benchmarking Global Optimizers,” with Antoine Arnoud and Fatih Guvenen.
[Research covered in: VoxEU.org, the Economist, LeMonde, ...]
Average incomes in the poorest two quintiles on average increase at the same rate as overall average incomes. This is because, in a global dataset spanning 121 countries over the past four decades, changes in the share of income of the poorest quintiles are uncorrelated with changes in average income. The variation in changes in quintile shares is also small relative to the variation in growth in average incomes, implying that the latter accounts for most of the variation in income growth in the poorest quintiles. In addition, we find little evidence that changes in the bottom quintile shares are correlated with country-level factors that are typically considered as important determinants for growth in average incomes or for changes in inequality. This evidence confirms the central importance of economic growth for improvements in living standards at the low end of the income distribution. It also illustrates the difficulty of identifying specific macroeconomic policies that are significantly associated with growth rates of those in the poorest quintiles relative to everyone else.
[Research covered in: VoxEU.org]
Concerns about rising inequality are at the forefront of many current policy debates. This paper uses a large cross-country dataset on growth and changes in inequality to assess the importance of these changes in inequality for changes in social welfare. Changes in inequality are on average small, less volatile than growth, and uncorrelated with growth. This implies that most of the variation in changes in social welfare within countries over time is due to differences in average growth performance. Equivalently, the additional growth in average incomes required to “compensate” – in terms of social welfare growth – for a typical increase in inequality is quite small. The main policy implication is the importance of overall economic growth for improvements in social welfare. Our work also suggests that it is difficult to find robust correlations between policy and institutional variables and changes in inequality, indicating that there is no simple recipe for enhancing equality. Furthermore, the fact that changes in equality are uncorrelated with economic growth means that there are likely to be some equality-enhancing policies that also promote growth, while others reduce growth. With growing pressure to “do something” about inequality, policymakers should avoid undermining growth in the quest for greater equality.