Policy brief on our recent book

It is too bad that almost two weeks have passed since the last post!  I still want to write something on policy ideas and policy entrepreneurship (concepts that we still have seriously underdeveloped), but have not had the time.  Before that, just to announce a new policy brief, Juliana Martínez Franzoni and I just published for UNRISD.  You can find it here.  Based on our recent book on Costa Rica, it highlights the role of elites and ideas in shaping policy over the long run.  The concept needs further development and empirical backing, but I think it is a good reminder that the composition of the elite and its preferences can vary a lot among countries.  Institutionalist approaches tend to focus too much on commonalities and on institutional incentives and not enough on ideas and structural differences.

...and technology makes concern for inequality even more significant

Also in the FT, a great article on the impact of robots and artificial intelligence on jobs.  According to a prediction from colleagues at the University of Oxford, almost half of all jobs in the US are at risk from these pressures.  The article highlights two potential results from these trends in the long run:

"This has fed two visions of the future of work. In one, the machines take on many of the boring parts of a job, setting humans free to supply the more advanced – and satisfying – brain work. The other vision is less harmonious: the machines leave many human workers on the scrap heap altogether."

There are at least two important reflections for the political economy of development:

a. Part of the problem to realize the more harmonious vision has to do with the influence of conservative ideology.  If unemployment is primarily a result of lazy people, it is hard to realize a society where people work less and where society builds new funding systems (including a basic income for all).  Yet these are exactly the types of policies we would need in a world dominated by robots.

b. What will happen in developing countries?  Will robotics slow down offshoring?  Will developing countries start replacing human jobs at lower levels of development than the rich countries are doing?

The IMF on the growth-inequality nexus

On Thursday I will be teaching a lecture on inequality and growth in the MPhil in Development Studies.  The same lecture a few years ago should have emphasized the IMF´s lack of concern for income inequality and its consequences--lack of concern that influenced the shape of its stabilization programs.  Yet this is no longer the case: income distribution and its costs is one of the areas where the IMF has experienced a more significant change (following the leadership of the World Bank a few years back).  In a recent working paper, the IMF´s deputy director for research, Jonathan Ostry and co-authors use cross-country regression analysis to show the negative impact of inequality on economic growth in developed and developing countries.  As stated in a FT column, he published yesterday:

"Taking into account the direct effect of redistribution, and the indirect effect that operates through reduced inequality, we find that average levels of redistribution are associated with higher and more durable growth."

This is welcome news and could gradually shift debates on stabilization and social policy.  Yet we need to follow insights like this with more attention to the broad causes of inequality and with the fact that a large share of inequality in the distribution of income can be explained by the resources of the very rich.