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Causes and Consequences of Income Inequality
This paper analyzes the extent of income inequality from a global perspective, its drivers, and what to do about it. The drivers of inequality vary widely amongst countries, with some common drivers being the skill premium associated with technical change and globalization, weakening protection for labor, and lack of financial inclusion in developing countries. We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down. This suggests that policies need to be country specific but should focus on raising the income share of the poor, and ensuring there is no hollowing out of the middle class. To tackle inequality, financial inclusion is imperative in emerging and developing countries while in advanced economies, policies should focus on raising human capital and skills and making tax systems more progressive.
Causes and Consequences of Income Inequality
This paper analyzes the extent of income inequality from a global perspective, its drivers, and what to do about it. The drivers of inequality vary widely amongst countries, with some common drivers being the skill premium associated with technical change and globalization, weakening protection for labor, and lack of financial inclusion in developing countries. We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth---that is, when the rich get richer, benefits do not trickle down. This suggests that policies need to be country specific but should focus on raising the income share of the poor, and ensuring there is no hollowing out of the middle class. To tackle inequality, financial inclusion is imperative in emerging and developing countries while in advanced economies, policies should focus on raising human capital and skills and making tax systems more progressive.
Nowcasting GDP - A Scalable Approach Using DFM, Machine Learning and Novel Data, Applied to European Economies
This paper describes recent work to strengthen nowcasting capacity at the IMF’s European department. It motivates and compiles datasets of standard and nontraditional variables, such as Google search and air quality. It applies standard dynamic factor models (DFMs) and several machine learning (ML) algorithms to nowcast GDP growth across a heterogenous group of European economies during normal and crisis times. Most of our methods significantly outperform the AR(1) benchmark model. Our DFMs tend to perform better during normal times while many of the ML methods we used performed strongly at identifying turning points. Our approach is easily applicable to other countries, subject to data availability.
Economic Scarring: Channels and Policy Implications
This paper documents the existence of medium-to-long term output losses following large crises using panel data that cover 192 countries from 1970 to 2015 and shows that the magnitudes of economic scarring depend on the nature of the shock, economic activity, and pre-crisis conditions. It also provides a thorough review of potential channels that can lead to scarring and presents novel empirical evidence on the significance of supply-side channels using cross-country sectoral-level data. Finally, the paper discusses policy implications based on the empirical findings.
Productivity Growth and Value Chains in Four European Countries
Advanced economies have been witnessing a pronounced slowdown of productivity growth since the global financial crisis that is accompanied in recent years by a withdrawal from trade integration processes. We study the determinants of productivity slowdown over the past two decades in four closely integrated European countries, Austria, Denmark, Germany and the Netherlands, based on firm-level data. Participation in global value chains appears to have affected productivity positively, including through its effect on TFP when facilitated by higher investment in intangible assets, a proxy for firm innovation. Other contributors to productivity growth in firms are workforce aging, access to finance, and skills mismatches.
Shared Problem, Shared Solution: Benefits from Fiscal-Monetary Interactions in the Euro Area
This paper employs two established macroeconomic models to show that fiscal policy in the euro area can help monetary policy in reducing inflation. Specifically, a fiscal consolidation of 1 percent of GDP for two years and 0.5 percent in the third year across the euro area would ease the policy interest rate by 30-50 basis points relative to the baseline scenario, while lowering inflation. It would also put the public debt-to-GDP ratio on a downward path, with the output costs reversing after the second year. Additionally, a stronger fiscal contribution to the policy mix could mitigate financial fragmentation risks. In the current context of elevated inflation in all euro area economies, the findings suggest two key takeaways: first, synchronized fiscal and monetary policies offer gains even when monetary policy is unconstrained and, second, sharing the burden of lowering inflation through fiscal consolidation among euro area members is beneficial for union-wide inflation reduction, improving debt sustainability and inducing a lower policy rate path.
Is the Glass Half Empty Or Half Full?
This paper examines water challenges, a growing global concern with adverse economic and social consequences, and discusses economic policy instruments. Water subsidies provided through public utilities are estimated at about $456 billion or 0.6 percent of global GDP in 2012. The paper suggests that getting economic incentives right, notably by reforming water pricing, can go a long way towards encouraging more efficient water use and supporting needed investment, while enabling policies that protect the poor. It also discusses pricing reform options and emphasizes an integrated and holistic approach to manage water, going beyond the water sector itself. The IMF can play a helpful role in ensuring that macroeconomic policies are conducive to sound water management.
Mitigating Long-Term Unemployment in Europe
While unemployment rates in Europe declined after the global financial crisis until 2018/19, the incidence of long-term unemployment, the share of people who have been unemployed for more than one year to the total unemployed, remained high. Moreover, the COVID-19 pandemic could aggravate the long-term unemployment. This paper explores factors associated with long-term unemployment in European countries, using panel of 25 European countries over the period 2000-18. We find that skill mismatches, labor market matching efficiency, and labor market policies are associated with the incidence of long-term unemployment. Among different types of active labor market policies, training and start-up incentives are found to be effective in reducing long-term unemployment.
Austria: Selected Issues
Selected Issues
IMF Research Bulletin, September 2015
The September 2015 issue of the IMF Research Bulletin covers a range of research topics. The Research Summaries featured in this issue are “Lower for Longer: Neutral Rates in the United States” (Andrea Pescatori and Jarkko Turunen) and “Economic Principles for Resource Revenue Management” (Anthony J. Venables and Samuel Wills). The Q&A article looks at “Seven Questions on Financing for Development” (Amadou Sy) and the global development agenda. The issue also includes special announcements on the 2015 Annual Research Conference and the 2015 IMF Annual Report, as well as new IMF publications. Readers will also find a link to a top-viewed article from the “IMF Economic Review”—the IMF’s official research journal.
