YTread Logo
YTread Logo

(3/4) 1st WID conference: Discussion with Esther Duflo and Branko Milanovic

(3/4) 1st WID conference: Discussion with Esther Duflo and Branko Milanovic
we are going to be very fortunate to hear comments from two experts on poverty inequality study so

Esther

Duflo

from MIT and then

Branko

Milanovic

from the City University of New York and then Gabriele zucman so they will each dog and after that we will sit here and we will take questions from the audience both about the report in general what we've heard in the first session and about what the

discussion

s are saying so we are going to start with

Esther

Duflo

so I will make a very short
3 4 1st wid conference discussion with esther duflo and branko milanovic
introduction I'm sure all of you know about her she's a world-famous development economist at MIT one of the most highly decorated young economists so she's done a lot of work in developing countries and her specialty is really to look at things from the field at a very micro level that is she's been doing a lot of randomized experiment experiments all over the world to see which type of policies or interventions can help tackle poverty in developing countries so it's going
to be very interesting to hear a perspective her perspective the contrast with our approach that is really about aggregating data from across all countries to obtain statistics on poverty she is going to tell us about how you know we can shift that curve of poverty at the world level perhaps you know starting from the ground with all the experiments she's been studying over the years so

Esther

please come and speak here at the podium thank you very much I will speak very briefly to try to
make three points so first of all congratulation to the whole team and this is a beautiful beautiful day beautiful report that was not that was point zero that's my three points are thank you very much and explain that so going to a couple of requests and third what I take you know if I had one substantive conclusion from this entire set of work you know bring it it perhaps to the to the broader context of my own work as as I was told to do as a discussant always so first thank you and this
is a phenomenal amount of work to produce all of this result this is also phenomenally useful both to do the work and then to present it in this way it is a readable accessible transparent it's going to it has the objective of shifting the public debate on these topics and I think it will it has succeeded already it will do even more this is a phenomenal amount of work that I'm sure for most people in this room know but maybe it is worth emphasizing for people in the media for the
reference to do the you know to try and bring not only sort of the the key inside but also the amount of decisions that have to be made and data said that have to be found and you know the if you read just the executive summary there is some sentence about the methodology that allows to solve this problem the methodology is really such a small I mean it's important but such a small part of the whole thing compared to digging into all of the data set and looking for every single data so
that's the first part of it this is in a sense you know it is similar to the the effort that we never similar in spirit to the effort that we never acknowledged in our own work when suddently we start using GDP they are trying to expand the notion of GDP to international account to include and to include the distribution but that's very much the same approach of like we need to to take the choices that needs to be taken to arrive at some summary measure this is not always pretty so
that's the other way that I I would say thank you personally I could not do it the I feel uncomfortable whenever I need to make an assumption that's that I cannot personally discuss with and of course you cannot do this exact size without you know dealing with data that is less than perfect and making an assumption that are somewhat heroic here and there and that someone is willing to do this and is willing to apply as much common sense as possible in doing this this is a great boon to
the rest of us the people who would not even get close to this so that's another way a reason why I'm saying thank you and that brings me to my second point of requests I have two requests one is that of course that starts with an acknowledgement that it's wonderful that the data is a variable that people can play with it that can people can you know change some of the assumptions I think there should be it would be great if there was a sense of the uncertainty or the sort of thing
surrounding some of these numbers because what we have in in the final report is a set of numbers they are the number of course it is clear and it is made clear that it is based on on on a series of choices on a series of extrapolation for example that needs to be made this is there is absolutely no lack of transparency on that and again people can go play with it but I think that it would be nice if there was some sense of for people to even someone who is too lazy to get into the database to
have a sense of where we know very well which is being said so if in the u.s. we are talking about the fraction of the of the income that goes to the top 1% at the moment it is very well known but then if we're talking about Africa where they might not be even one survey then we know a bit less and so some amount some way I don't know even what it would be but some way of conveying how much certainty there is would be wonderful the second request and this is where it comes you know
closer to my own work is is to have is to add as Israeli something to add to the wonderful body of some artistic story there is to have to add something on poverty because right now we have a lot on the fifty percent the poorest people in do well by mice in my books in my line of trade someone who is at the fiftieth percentile of the world distribution is pretty much in India someone who is at the fiftieth percentile of the world distribution and mills in India would be of course near the top of
the distribution India so and it turns out that delivering data on poverty is in some respect easier than delivering it on inequality because a lot of the issues that we have on survey data in developing countries where when I'm talking about poverty already talking about extreme poverty people who live under a dollar a day $2 a day $5 a day etc that is something which they are much easier to survey turns out that the rich are people so I think actually some is known and exists of course to
some extent in some dataset would be a nice combination as it turns out from my understanding of what has happened to poverty since 1990 it's very similar to what they are saying what the report tells us what happened to the bottom 50% so I don't think substantively there is anything misleading in the data they are now but in practice it could be quite it could be quite different when practice we've seen in in the report that the bottom 50% is doing pretty well in relative term and
similarly we also know that the number of people living under $2 a day has been about half since 1990 so in concretely the conclusion is the same but it wouldn't have to be because it could be for example that in India all of the growth happens for people who are you know even if it were in the 50 years percentile of the India distribution of then then maybe nothing would have happened to birds so I think it would complete to have some you know focus on poverty would complete nicely
3 4 1st wid conference discussion with esther duflo and branko milanovic
that's some test and another thing to add of course it's another set of data set to look at but that would be wonderful complement now I want to finish by saying what other substantive conclusion I take from you know stepping back and saying what are the substantive conclusion for that I take from the report and that's another thank you because in a sense it's sort of justify what what a lot of my project has been since I've been an economist I work as a manual has cells on
evaluation of Social Policy design and the evaluation of Social Policy in particular towards the very very poor mostly in poor countries and something that I have to contend with in a lot of my work has been the almost instinctive reaction by that's very nice what you're doing but this is the small things the only thing that really matters to do something about poverty is economic growth look at India look at China they got rid of power you know this is where the property went away
because they go so you're always saying well yes in a sense if we were sure that goes was the only thing that mattered and if we knew how to influence goals then yes it would make sense to work on young cause for poverty but both of these things are not you know potentially debatable on the second point if we knew what to do about gold I think the microeconomic professional as nicely come to the conclusion that they don't so that's nice and and this this gives me a mission on the
first one which is these things you know this seems we self sustaining but there is absolutely nothing automatic between the economic goals of an economy and what happens in the country and of course this should stand to reason but I think this this shows it this data show it very clearly in two countries so here we have and tequila China and India it chemicals is good clearly you you know you need some economic goals to improve the situation of the food but it's it's insufficient
because nothing says that because will that the the share of the course that goes to the poor is going to be sufficient to make them less poor now it turns out that you really don't need all that much because since the poor are very poor you need just a little bit of goals of the economy will take a lot of people out of poverty because you don't need a lot of dollars to make someone go from two dollars a day to to the last point ten cents a day so partly this is you know even if we see
that in China and India as goals has come up inequality has increased even with that like it's still a little bit left over but it was not necessarily the case it could have been that the ghosts would have been entirely captured by the rich and we know that this is what happened in the US for example so it could have been the same in China and India there is nothing automatic about ghosts leading to improvement at the poor it hold it's related to distribution how it is distributed and of
course then we think well but then you you can discuss growth and tax policy and you've done but what they report even in the short version clearly acknowledges is that when we're thinking about distribution and in particular distribution to out the poor and it's not just about taking the money from the rich we'll have to figure out what is the right way to distribute it such that the the poor can you know hop on the bandwagon at some of them so I've always contended that
there are if we are very interested in in in poverty which is what I work on the only thing we can so Donna Singh we can know for sure is to try and improve the situation of people here now and then with a bit of luck that's going to make put them in a position to hop out and hop on the coast bandwagon when if and when such bandwagon comes and the report talks about education for example as something being a sunshine and maybe like in in the US which is one reason why people are not have not
hopped on the bandwagon in developing countries we want to think about education we want to think about health we want to think that although the various things that it seems to accent will make it necessary will be necessary for the poor to be able to capture some of the goo now the question of distribution is of course essential because if the poor tech oldham if the rich take all the money that there are is that which seems quite plausible it could happen then there would be nothing to
distribute but then once if they don't take all the money that is created by goes then the question of how we effectively are distributed to the poor and in particular is there ways to distribute that puts them in a position to take advantage of the course even when it comes seems like essential questions to to resolve so in the rich countries course is nice to have and it's definitely not sufficient we could go in the detail in the question of China and India and how they have had
specific policies of core distribution mall as an end of social policies more or less effective in in both countries which but probably played a role in keeping the poor enjoying the benefit of the growth even as inequality market was exploding in both countries but the last point is that and this is again another Java economy good the other thing that I guess was in the back of my mind but became very clear in reading these papers so right now for example there is this whole debate about
whether the tax reform in the US will increase economic growth on and so most economists thinks it will not and then some loonies thinks it will but it's like it's beside the point even if it does the first-order effect is that it's going to increase inequality the fact that it has a second-order effect on course we don't care one way or the other it is even even in fact it is possible one can argue that from a social point of view and from a political point of view when you are
when you live in the like I do is something which is very very salient right now the course that has happened in the last many decades has been bad not even that you know you would be better with no cause because on the one hand none of these girls came to the vast majority of the people and on the other it creates both the sense for the vast majority of the people who don't benefit from the goals that existed there was a bunch of losers because since the economy is going how is it is that
they are not doing right and creates this you know very big inequalities which are you know which has been one of the reason of creating of creating social resentment so as people see that all these go see the benefit none of it is that I think they're loser or they think that someone else must be stealing it from them which could be the Chinese the Hispanics the blacks you know pick your pick and so it kind of reinforces me on the question that working that working on the question of growth
3 4 1st wid conference discussion with esther duflo and branko milanovic
per se is not a very fruitful exercise thank you very much thank you very much

Esther

for these commands so next we're going to hear from

Branko

Milanovic

so

Branko

Milanovic

is currently at the city university of new york and he is a veteran of inequality studies and indeed is a pioneer of studying the world income distribution that is it was you know among the first to put together survey data from a number of countries to build what is effectively a world income distribution in a recent
study actually with Chris Lackner he built the first elephant curve of how growth is at each percentile and as you can see you know from the report we presented this morning his pioneering work has very much inspired us to build on his contribution try to improve the data especially with our expertise capturing the top of the income distribution so we very much look forward to hear the reaction of bronco 2:12 our report well thank you very much thanks a lot to Manuel for the very nice veteran
dish introduction it's over of course it's a pleasure to be here I actually want to say I'm extremely pleased in my tweets actually I mentioned this is a little bit like the World Cup of inequality studies so I'd be I guess in like two years we will have another maybe regional competitions even to come to Paris and indeed this is I think important because of the enormous work which actually we have heard also from the presentations you know this morning and also

Esther

has
mentioned so it's a normal work but I would like to emphasize I think it has two objectives in my opinion it's reaching to object with one is incredible work on inequality and knowing global inequality much better but the other part is actually breaking into the mainstream economics where unfortunately inequality still is not mainstream even after ten years after the crisis is still not fully integrated and secondly also branching out towards the popular interest which is very huge but
of course is also in need or better or more exact data so in that sense I think it is of course a great contribution it puts together physical data physical data particularly which are good at the very top I will not repeat all the things that we know but it also uses obviously house to survey data national accounts and of course there is another sort of a breakthrough which is the use of distributional national accounts to put together really basically the national accounts which were
essentially GDP driven but also to look at how the distribution of that national accounts account takes place another part which is important I think of course Gabrielle will talk about that is the inclusion of evasion because it's a very important part you know we study you know inequality using surveys we study using its administrative data obviously physical data but there is one part which is never covered anywhere it is by definition not covered in the surveys it is by definition or
cover the fiscal account in in physical data because people not report I mean by definition they have to sort of move that money when it was not be taxed and it's probably increasing in importance and I think it's an important point because they think globalization has made a movement of capital of that nature much easier and the top 1% uses that the report also highlights the importance of China up to now which is not a novelty of course we have known that be it in poverty or global
inequality the China has played really the key role but it also emphasizes I'll mention that towards the end also is that that role has really come is coming to an end in other words if China was a great equalizer but as China becomes richer and richer that great equalizer role is no longer playable China it becomes then played by India and maybe in the future without by Africa which is of course the the question mark because we don't know if Africa will converge in the way that Asia has
converged in this last 50 years and then highlights the importance of India and the huge inequality in India I really would like to highlight that point because it is something that the report does which is actually not very well acknowledged or known because the Indian data used to be housed to survey data were very venerable 1952 nationals from 1952 and they show a much lower level of inequality than income data and much lower level of inequality than fiscal data so it's something really
very important and then finally highlights the importance of reducing what they can call the marginal gains of the national top 1% where a by I mean is in the projections as actually Luka spoke before the assumption is that the rich continue taking the same share of total income and that's really basically sort of a new approach of looking in projections by assuming that the marginal gain of the rich remains the same so I think we are now of course in a very special period of time I would
like to emphasize that because we have you know this is implicit and sometimes explicit in the report we have decreasing or constant global inequality and in most cases rising national inequities so that's the first one then we have in merchants of the global middle class and we have declining a middle classes in practically all rich countries not only the US and the UK we have it in Finland we have it in Sweden we have it in Germany we have somewhat paradoxically from the point of view of
twenty years ago we have much greater acceptance of globalization in the south than currently in the north you see that from Pew Research Fund questions we have the rise of Asia which is quite myth known and actually continued decline of Africa which is somewhat less known because Africa sort of tends not to take too much space but with population increase in Africa this particular effect will become more and more important and then we now share which is an interesting phenomenon I called this
articulation in the West which in the past we used to believe that happens only in the poor countries within elite which is integrated into the global world and in a hinterland or some people who are actually not very happy with that and who actually don't find their place there and there is of course a Lost Decade in the West actually the term was used in the report but because the distribution is being unequal and heterogeneous that Lost Decade was not obviously lost decade for everybody
for some people it was actually quite a good decade and for many others it was not now this is I did simple summary of what actually look I already presented today so I will not go over that but you can read the numbers but it is really striking how the world has changed in the in two generations so if you look at these countries France I took France intentionally because it doesn't show much of a change but everywhere else you see the share of the top one percent increasing really by leaps
and bounds it's like you know in double digits numbers so it is really if we look at the world today and the world that it was in the late 70s or early 80s these are really two different worlds the interesting part however that this world of the late 70s early eighties was also the world where the between country inequality was probably at around its peak so today's structurally today's world is is very different then what they did also I looked at the data that Christophe Lochner
and I did with house call service and with top income adjustments so we adjusted top incomes because of the reason that you all know that the arousal service really do not cover the very top 1% or maybe you've top 3% very well and this is the blue line and this is actually the Gini coefficient obtained from causal service with top adjustment then I took the red line which is actually coming from the report which is the top 1% as you can see actually they don't the the on the vertical
axis you have on your on the left you have the Gini and on the right you have the top 1% so you see actually the movements are not very dissimilar you know both reach a peak actually calls for survey data reach the peak already in the the peak of inequality already in the early 2003 2004 here the peak is in 2008 just at the time of the crisis and the sharpness of the increase of the top 1% is greater because obviously the Gini is a very sluggish measure gene is not going to actually show you
that much of a sharpness when it comes to the decline as you can see it's actually fairly similar between 2007 2008 until today so this is the same story also in a summary the decline from the peak in in in our case with the hospital service is 8 percentage points with the decline of the top 1% is 1 7 percentage points and then with the exchange rates it's actually also interesting I like that the report introduces the exchange rates not only PP beans obviously these shares go up in the
terms of of shares it goes by two percentage points up in terms of genie we are talking about 10 to 12 percent genie point increase so it's actually it's quite dramatic when you think that actually the genie of the world using an even probably under estimating it for top incomes and um plus under estimating it because of a being ability to to include evaded money or you know a sort of tax came in money is something around almost 80 so that's an incredibly high genie that actually
pride no country has you know even South South Africa doesn't have and one thing that we have somewhat of a change although this is a rough calculation is the mean income mean income in the world that we get from cloud service are fifteen to seventeen dollars per day here actually I took a number that that the report presents its per adult so I'm not sure that I really got the right number between the number of adults the number of people in the world I looked at Wikipedia it does have a
little bit of it and so I but I came with something which is 25 dollars per day so there is a I think signal if these numbers if my calculations are true then there is slightly higher well significantly higher mean income in the database that that we represent you today finally when I speak of Africa one thing that actually want to point out is what is an interesting phenomenon and the world is getting richer as is the mean goes up the median also goes up particularly when you have large
countries like China and India that move up toward income distribution but the irony of that is that if you are not going at that speed so and you're behind these countries that are large and they're improving then actually you're sort of distance from the median becomes larger and that's why you might have yet another somewhat contradictory development that the percentage of people who are in poverty where poverty is defined in relative terms is like one half of the global media
is going up and these are the people who are kind of left out not necessarily because they're becoming poorer because they are not actually they're becoming richer but not at the speed with which the median and the mean of the world are going up and of course especially not at the speed that the top 1% goes up and my last slide is the sort of lessons that I took from the report the first one is that the China effect as I said before is about to be over so we cannot any longer rely on
China to drive global poverty down to stop global poverty for increasing so that effect is kind of waning you know I used to say to my students that actually now the world has two big sumo wrestlers wrestling global inequality down one is China the other one is India and actually that one sumo wrestler because we became rich he abandoned sumo wrestling and now we really cannot count on that it's really now India which really is about to take or should take the role of China the second one
which also dimension is African the diverges becomes the force for growing inequality which is a problem unless Africa becomes the Asia of the 21st century and that is a problem for global poverty it's a global problem problem for global inequality and obviously it is a problem for migration so as I said before Africa because of its rising population will come to play much more important role in the further World Cups that we have here with you know maybe in ten years or so and my final
point is that the of course the lesson or the threat to global inequality that if the rich countries continue by taking the same share of additional if the region sorry it continued by taking the same share of the additional income as they did during the past two decades then we are in this scenario of business as usual which actually is extremely divergent force and a force for the rising global inequality and I say as I said I think before is actually a very much like this approach of sort of
studying so Tobias Lee project in the future nobody knows what will happen but that's a nice approach of looking at the marginals and saying okay the business as usual is basically we just say that the rich take the same share then in the next twenty years that they have taken in the past twenty years so this would be in my opinion the biggest threats to global inequality and I think actually that these are the issues that should make us all sort of think how to avoid them in the future so
thank you very much again and congratulations to the authors you you