A Theory of Financial Inclusion and Income Inequality

We develop a theory linking financial inclusion, defined as access to formal loans and financial assets, to income inequality. Initial inequality of households is modeled by a random variable determining initial endowments. These initial endowments can be used to invest instantaneously in human capital and financial assets. Human capital translates into income based on a strictly concave production function, suggesting optimal levels of investment. Financial assets earn yields which do not depend on the amount invested by individuals. Theoretical predictions are tested using the China Household Finance Survey (CHFS) for 2011 and 2013. Initial conditions modeled by a random variable are replaced by an actual distribution of income or assets to derive theoretical predictions regarding the proportion of the population that might benefit from financial inclusion. Financial inclusion does mitigate under-investment in education – but formal loans do not contribute. Income inequality worsens if households rely on formal or informal loans, whereas access to bank accounts improves households' prospects in the future income distribution. However, households below the 40th percentile of household income do benefit from informal loans

Socioeconomic inequalities in health among Swedish adolescents - adding the subjective perspective

Abstract Background Socioeconomic inequalities in adolescent health predict future inequalities in adult health. Subjective measures of socioeconomic status (SES) may contribute with an increased understanding of these inequalities. The aim of this study was to investigate socioeconomic health inequalities using both a subjective and an objective measure of SES among Swedish adolescents. Method Cross-sectional HBSC-data from 2002 to 2014 was used with a total sample of 23,088 adolescents aged 11–15 years. Three measures of self-rated health (dependent variables) were assessed: multiple health complaints, life satisfaction and health perception. SES was measured objectively by the Family Affluence Scale (FAS) and subjectively by “perceived family wealth” (independent variables). The trend for health inequalities was investigated descriptively with independent t-tests and the relationship between independent and dependent variables was investigated with multiple logistic regression analysis. Gender, age and survey year was considered as possible confounders. Results Subjective SES was more strongly related to health outcomes than the objective measure (FAS). Also, the relation between FAS and health was weakened and even reversed (for multiple health complaints) when subjective SES was tested simultaneously in regression models (FAS OR: 1.03, CI: 1.00;1.06 and subjective SES OR: 0.66, CI: 0.63;0.68). Conclusions The level of socioeconomic inequalities in adolescent health varied depending on which measure that was used to define SES. When focusing on adolescents, the subjective appraisals of SES is important to consider because they seem to provide a stronger tool for identifying inequalities in health for this group. This finding is important for policy makers to consider given the persistence of health inequalities in Sweden and other high-income countries

Debt Sustainability and direction of trade: What does Africa’s shifting engagement with BRIC and OECD tells us?

This study assesses the evolution of debt sustainability in the Sub Saharan African (SSA) region. It also examines the respective contributions of OECD and BRIC to debt sustainability in the region. We reveal how the external demand for SSA goods and services from OECD and BRIC helps to lower ‘debt-to-exports’ and ‘debt-service-to-exports’ ratios, two of the main gauges of debt sustainability. Furthermore, using simple growth accounting, we assess how the net exports by SSA to the OECD and BRIC contributes to the region’s GDP growth, and thus indirectly helps to lower the ‘debt-to-GDP’ ratio, which is another important measure of indebtedness. Our study also compares the ‘actual’ debt levels of SSA with ‘hypothetical’ debt levels that simulate the contributions of OECD and BRIC. On the basis of debt sustainability thresholds of the joint IMF-World Bank Debt Sustainability Framework (DSF), we test how the sustainability of SSA debt has evolved overtime and how much the OECD and BRIC contribute to three classes of ‘weak’, ‘medium’ and ‘strong’ debt sustainability targets

THE LIBERAL PEACE: CHALLENGES TO DEVELOPMENT, DEMOCRACY AND SOFT POWER

The term “liberal” peace refers to the absence of fatal conflict between democratic nations, which are also economically interdependent. This chapter sketches the ideal and economic versions of the liberal peace theory. Policies promoting globalization may engender social conflict risks, as they produce inequality. In developed countries, we are witnessing the rise of populism, and the rolling back of the liberal aspects of democracy in developing countries. The avoidance of these problems requires careful management such that growth is broad-based, and policies promoting greater openness are sufficiently cushioned to protect losers. It is also necessary to manage globalization, and limit its negative impact on domestic social contracts, particularly when it comes to inequality, worker rights, and fiscal austerity

Growth and welfare in mixed health system financing with physician dual practice in a developing economy: a case of Indonesia

Based on Indonesia’s hybrid BPJS Kesehatan health system, we analyze for welfare-optimal government financing strategy in an economy with a mixed health system using an endogenous growth framework with physician dual practice. We find the model solution to produce two vastly different regimes in terms of policy implications: a “high” public-sector congestion regime as in the benchmark case of Indonesia, and a “low” public-sector congestion, high capacity regime. In the former, welfare-optimal health financing strategy appears to be promoting private health service. In contrast, in the low-congestion, high capacity regime, a welfare-optimal strategy is to do the opposite of increasing government physician wage at the expense of private health subsidy. These results highlight the importance of developing a benchmarking system that measures the actual degree of congestion faced by the public health service in a developing economy, as it ultimately would influence the optimal health financing strategy to be pursued

Reflecting on ICN2: Was it a game changer?

At the Second International Conference on Nutrition (ICN2), November 2014, 170 member states endorsed the Rome Declaration on Nutrition and a Framework for Action. The Rome Declaration committed to ending malnutrition in all its forms while the Framework for Action offered 60 voluntary actions to help achieve this. These documents and ICN2 itself had the potential to be a major step forward for public health nutrition, addressing issues associated with today's complex food system. This article reviews ICN2, its process, outputs and some of the gaps and weaknesses of the documents. ICN2's legacy can be interpreted in two ways-a missed opportunity or one of broad aspirations which have yet to translate into meaningful action. The paper considers whether ICN2 could have adopted a more ecological approach to diet and nutrition, linking health and sustainability. While this fits the evidence, it would require a strong commitment to coherence and food system change, almost certainly a firm stance on some food corporate power, and resolve to champion health at the heart of economic policy. This ambitious agenda would require specific multi-actor and multi-level action, together with metrics and mechanisms for accountability. Coherent government policies and actions to tackle all manifestations of inappropriate diet, and to reframe the economic forces which shape such diets are urgently required. To achieve this, the public health movement needs to work closely with civil society, yet ICN2 showed that there is some reluctance to energise that combination. As a result, ICN2 must be judged a missed opportunity, despite having useful aspirations

Foreign aid, instability and governance in Africa

This study contributes to the attendant literature by bundling governance dynamics and focusing on foreign aid instability instead of foreign aid. We assess the role of foreign aid instability on governance dynamics in fifty three African countries for the period 1996-2010. An autoregressive endogeneity-robust Generalized Method of Moments is employed. Instabilities are measured in terms of variance of the errors and standard deviations. Three main aid indicators are used, namely: total aid, aid from multilateral donors and bilateral aid. Principal Component Analysis is used to bundle governance indicators, namely: political governance (voice & accountability and political stability/no violence), economic governance (regulation quality and government effectiveness), institutional governance (rule of law and corruption-control) and general governance (political, economic and institutional governance). Our findings show that foreign aid instability increases governance standards, especially political and general governance. Policy implications are discussed

Macroeconomic Effects of Credit Deepening in Latin America

This paper augments a relatively standard dynamic general equilibrium model with financial frictions in order to quantify the macroeconomic effects of the credit deepening process observed in many Latin American (LA) countries in the last decade, most notably in Brazil. In the model, a stylized banking sector intermediates credit from patient households to impatient households and firms. The key novelty of the paper, motivated by the Brazilian experience, is to model the credit constraint faced by (impatient) households as a function of future labor income. In the calibrated model, credit deepening generates only modest abovetrend growth in consumption, investment, and GDP. Since Brazil has experienced one of the most intense credit deepening processes in Latin America, it is argued that the quantitative effects for other LA economies are unlikely to be sizeable