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Mining Revenues and Inclusive Development in Guinea
What are the potential benefits of increasing the taxation of a foreign extractive sector? This paper applies this question to the case of Guinea by using a multi-sector macro-inequality model with heterogeneous agents. We quantify the long-run equilibrium impact of additional taxation when the proceeds are invested in human capital, inclusive infrastructure, and social transfers. Our analysis focuses on the response of GDP, labor formalization, poverty rates, Gini coefficients, rural/urban inequality and sectoral reallocation. The three forms of investment are complementary. Infrastructure investments favor formal production in the urban area while growth and government transfers boost the demand for food. These effects help support the rate of return to education, protecting job formalization through higher wages and prices of informal goods, as the education policy boosts labor supply in rural and urban areas.
When Will Global Gender Gaps Close?
On the current pace of reforms, global gender gaps are estimated to close, using deterministic (linear or log-linear) trends, over the next three centuries. This means that many women will likely not be able to fully use their abilities and talents, to the detriment of societies, for a long time. Yet this paper shows that, absent a significant step up in policy efforts, gender gaps may in fact never close. Using Markov chains, a common approach in macroeconomics, this paper analyzes the dynamics of the cross-country distribution of the gender gap in labor force participation. This methodology does not impose strong restrictions on the data, allowing for episodes of progress as well as regress by countries on gender inequality. Based on the experience of the past three decades, the analysis predicts a further narrowing of gender gaps over time. But the long-run distribution of gender gaps in labor force participation features a substantial share of countries with persistently large gaps, implying that—absent a strengthened and systematic policy effort—some of the current misallocation of women’s talents and abilities could persist perpetually.
Guinea
Guinea: Selected Issues
Recoveries After Pandemics: The Role of Policies and Structural Features
To shed light on the possible scarring effects from Covid-19, this paper studies the economic effects of five past pandemics using local projections on a sample of fifty-five countries over 1990-2019. The findings reveal that pandemics have detrimental medium-term effects on output, unemployment, poverty, and inequality. However, policies can go a long way toward alleviating suffering and fostering an inclusive recovery. The adverse output effects are limited for countries that provided relatively greater fiscal support. The increases in unemployment, poverty, and inequality are likewise lower for countries with relatively greater fiscal support and relatively stronger initial conditions (as defined by higher formality, family benefits, and health spending per capita).
Guinea
Following a coup d’état in September 2021 and a year of socio-political tension, the situation has stabilized after the authorities agreed with ECOWAS on a revised, shorter (24-month) transition calendar. While the non-mining sector remains weakened by the subsequent shocks—the pandemic, political uncertainty, the global food and fuel price shock and ensuing food insecurity—overall growth remains buoyant, driven by strong mining production. Inflation hovered around 12 percent for most of 2021 and 2022, despite significant international prices pressures. Food insecurity became increasingly acute during 2022 stemming from the price shock and could be exacerbated next year.
Political Institutions and Output Collapses
Major output collapses are costly and frequent in the developing world. Using cross-country data, we classify five-year periods using a two-dimensional state space based on growth regimes and political institutions. We then model the joint evolution of output growth and political institutions as a finite state Markov chain, and study how countries move between states. We find that growth is more likely to be sustained under democracy than under autocracy; output collapses are more persistent under autocracy; and stagnation under autocracy can give way to outright collapse. Democratic countries appear to be more resilient.
Green Bond Pricing and Greenwashing Under Asymmetric Information
We analyze the corporate green bond market under a rational framework without an innate green preference, using a simple adverse selection model. Firms can use green bonds to signal their green credentials to investors. Transition risk stems from uncertainty over the introduction of carbon pricing. We show that green bonds have a price premium over conventional bonds when there are information asymmetry, transition risk, and it is costly to engage in greenwashing, that is, false or exaggerated claims of being green. The extent of greenwashing in the market is a function of the green bond premium. A swift and gradual implementation of carbon pricing generates a small green bond premium and a low level of greenwashing, while delayed and large carbon pricing has an ambiguous effect on both. The model provides a rich set of policy implications, notably the need for swift action on carbon pricing and strong information disclosures and regulations to ensure the integrity of green bonds.
From Neighborhoods to Nations
Just as we learn from, influence, and are influenced by others, our social interactions drive economic growth in cities, regions, and nations--determining where households live, how children learn, and what cities and firms produce. From Neighborhoods to Nations synthesizes the recent economics of social interactions for anyone seeking to understand the contributions of this important area. Integrating theory and empirics, Yannis Ioannides explores theoretical and empirical tools that economists use to investigate social interactions, and he shows how a familiarity with these tools is essential for interpreting findings. The book makes work in the economics of social interactions accessible ...
Macroeconomic Developments and Prospects In Low-Income Countries—2021
This paper is the sixth in a series that examines macroeconomic developments and prospects in low-income countries (LICs). LICs are defined in this report as the countries eligible to PRGT facilities (69 countries). The first section of the paper discusses recent macroeconomic developments and trends across LICs. The second section estimates LICs’ financing needs up to 2025 to resume and accelerate their income convergence with advanced economies (AEs). It does this by estimating the additional financing that would enable LICs to step up spending response to COVID, including vaccination needs, while rebuilding or keeping external buffers to enhance resilience, and then the paper considers the financing needed to allow LICs to accelerate convergence with AEs. The paper then discusses a mix of financing options, including concessional financing from the international financial institutions, grants and loans from bilateral donors, private financing and debt operations, but also domestic reforms within LICs themselves as a key component to foster growth, enhance private investment, raise public revenues, and increase efficiency of spending.
Social Versus Individual Work Preferences: Implications for Optimal Income Taxation
The benchmark optimal income taxation model of Mirrlees (1971) finds that the optimal marginal income tax rate (MIT) is always non-negative. A key model assumption is the coincidence between social and individual work preferences. This paper extends the model to allow for differences in social and individual work preferences. The theoretical and simulation analyses show that under this model, when the government places a higher social weight on work than individuals, the optimal MIT schedule is shifted downwards, introducing the possibility for optimal wage subsidies at the bottom of the income distribution. This implies lower revenues, demogrants, and overall progressivity.
