Inequalities of wealth distribution in a conservative economy

We analyze a conservative market model for the competition among economic agents in a close society. A minimum dynamics ensures that the poorest agent has a chance to improve its economic welfare. After a transient, the system self-organizes into a critical state where the wealth distribution have a minimum threshold, with almost no agent below this poverty line, also, very few extremely rich agents are stable in time. Above the poverty line the distribution follows an exponential behavior. The local solution exhibits a low Gini index, while the mean field solution of the model generates a wealth distribution similar to welfare states like Sweden.Comment: 7 pages, 4 figures, submitted to Physica A, Proceedings of the VIII LAWNP, Salvador, Brazil, 200

Has India's economic growth become more pro-poor in the wake of economic reforms ?

The extent to which India's poor have benefited from the country’s economic growth has long been debated. This paper revisits the issues using a new series of consumption-based poverty measures spanning 50 years, and including a 15-year period after economic reforms began in earnest in the early 1990s. Growth has tended to reduce poverty, including in the post-reform period. There is no robust evidence that the responsiveness of poverty to growth has increased, or decreased, since the reforms began, although there are signs of rising inequality. The impact of growth is higher for poverty measures that reflect distribution below the poverty line, and it is higher using growth rates calculated from household surveys than national accounts. The urban-rural pattern of growth matters to the pace of poverty reduction. However, in marked contrast to the pre-reform period, the post-reform process of urban economic growth has brought significant gains to the rural poor as well as the urban poor.Rural Poverty Reduction,Achieving Shared Growth,Services&Transfers to Poor,Inequality

Small Business Economics of the Lakota Fund on the Native American Indian Reservation

Poverty rates on Native American Indian reservations are triple the US average. Small business incubation programs, available elsewhere in the US, are sparse on the reservations. Small businesses are potent drivers of US economic growth. Some 25.5 million entrepreneurs generate more than 50% of the GDP, are 26% of the exporters, and create 80% of the total net new job formation. The Small Business Administration (SBA), an independent agency of the federal government created in 1953, maintains and strengthens the nation's economy by aiding, counseling, assisting, and protecting the interests of small businesses and by assisting families and businesses to recover from national disasters. SBA services hardly exist on the Native American Indian Reservations (NAIRs), however. Studies have linked micro entrepreneurial activities to economic growth and poverty reduction. Our study tests the effects of the Lakota Fund (LF), a small business development initiative, on the NAIRs to determine whether SBA-like programs (loans, training, and consulting) can improve economic conditions on the NAIRs. The LF, a private micro loan and business training initiative on the Pine Ridge Reservation in South Dakota, is tested for its effectiveness in generating income. The 1980-2006 annual county-level data (Shannon Co. is 'treatment', Todd Co. is 'control') are a natural experiment; the counties are similar otherwise. Using the real per capita income (RPCI) dependent variable, and controlling for other factors, our regression results indicate that the LF initiative and its duration (intensity) raised RPCI significantly − suggesting the success of a privately funded small business incubation initiative targeted at isolated impoverished groups within the highly developed US economy. Suggestions for future research and program replication ideas are explored.poverty rates, Small Business Administration, Lakota Fund, life expectancy, public sector

Risk and Time Preferences: Linking Experimental and Household Survey Data from Vietnam

We conducted experiments in Vietnamese villages to determine the predictors of risk and time preferences. In villages with higher mean income, people are less loss-averse and more patient. Household income is correlated with patience but not with risk. We expand measurements of risk and time preferences beyond expected utility and exponential discounting, replacing those models with prospect theory and a three-parameter hyperbolic discounting model. Comparable risk parameter estimates have been found for Chinese farmers, using our method

Behavioural Development Economics: Lessons from field labs in the developing world

Explanations of poverty, growth and development more generally depend on the assumptions made about individual preferences and the willingness to engage in strategic behaviour. Economic experiments, especially those conducted in the field, have begun to paint a picture of economic agents in developing communities that is at some variance from the traditional portrait. We review this growing literature with an eye towards preference-related experiments conducted in the field. We rely on these studies, in addition to our own experiences in the field, to offer lessons on what development economists might learn from experiments. We conclude by sharing our thoughts on how to conduct experiments in the field, and then offer a few ideas for future research.

Poverty, politics, and preferences: Field experiments and survey data from Vietnam

We conducted field experiments to investigate how wealth, political history, occupation, and other demographic variables (from a comprehensive earlier household survey) are correlated with risk, time discounting and trust in Vietnam. Our experiments suggest risk and time preferences depend on the stage of economic development. In wealthier villages, people are less loss-averse and more patient. Our research also shows people who participate in ROSCAs (rotating credit associations) are more patient than non-participant, but those who participate in bidding ROSCAs are less patient and more risk averse than those who participate in fixed ROSCAs. Results from a trust game demonstrate both positive and negative effects of communism. Villagers in the South tend to invest more in low-income partners without expecting repayment. On the other hand, people in the north are more trustworthy but do not pass on more money to the poor. Our findings also suggest market activities, like starting a small trade business, are correlated with trust and trustworthiness. We also contribute to experimental methodology by using choices that separate different aspects of risk aversion and time preferences in behavioral economics specifications

An out-of-equilibrium model of the distributions of wealth

The distribution of wealth among the members of a society is herein assumed to result from two fundamental mechanisms, trade and investment. An empirical distribution of wealth shows an abrupt change between the low-medium range, that may be fitted by a non-monotonic function with an exponential-like tail such as a Gamma distribution, and the high wealth range, that is well fitted by a Pareto or inverse power-law function. We demonstrate that an appropriate trade-investment model, depending on three adjustable parameters associated with the total wealth of a society, a social differentiation among agents, and economic volatility referred to as investment can successfully reproduce the distribution of empirical wealth data in the low, medium and high ranges. Finally, we provide an economic interpretation of the mechanisms in the model and, in particular, we discuss the difference between Classical and Neoclassical theories regarding the concepts of {\it value} and {\it price}. We consider the importance that out-of-equilibrium trade transactions, where the prices differ from values, have in real economic societies.Comment: 11 pages + 7 figures. in press on Quantitavive Financ

Beyond Oaxaca-Blinder: Accounting for Differences in Household Income Distributions Across Countries

This paper develops a micro-econometric method to account for differences across distributions of household income. Going beyond the determination of earnings in labor markets, we also estimate statistical models for occupational choice and for the conditional distributions of education, fertility and non-labor incomes. We import combinations of estimated parameters from these models to simulate counterfactual income distributions. This allows us to decompose differences between functionals of two income distributions (such as inequality or poverty measures) into shares due to differences in the structure of labor market returns (price effects); differences in the occupational structure; and differences in the underlying distribution of assets (endowment effects). We apply the method to the differences between the Brazilian income distribution and those of the United States and Mexico, and find that most of Brazil's excess income inequality is due to underlying inequalities in the distribution of two key endowments: access to education and to sources of non-labor income, mainly pensions.http://deepblue.lib.umich.edu/bitstream/2027.42/39863/3/wp478.pd