Global Economic Prospects

The global economic recovery is continuing but at a somewhat slower pace than was anticipated six months ago. Specifically, using the country weights from the IMF's World Economic Outlook, the forecast for real GDP growth in the world economy during 2002 (i.e., on a fourthquarter- to-fourth-quarter basis) is cut by about half a percentage point to 3 percent-- a pace that is slightly below my estimate of the potential growth rate for world GDP. This downward revision reflects primarily slower growth than earlier expected during the first half of 2002 in most industrial countries and the expectation that growth will remain somewhat more sluggish than earlier expected at least through year-end. For 2003, the forecast for global economic growth is also cut by about half a percentage point--to 4 percent--reflecting both general factors suggesting slightly weaker performance in many industrial and developing countries and the particular economic risks arising from possible military action against Iraq and from potential credit events affecting key developing countries. Despite these downward revisions, however, there is little doubt that the world economy will see significant improvement this year from the 1 percent growth recorded in 2001, and it is still reasonable to expect further improvement to a growth rate modestly above global potential during 2003.

Global Economic Prospects: Through the Fog of Uncertainty

The global economic recovery lost considerable momentum in late 2002 and appears likely to remain sluggish through the fi rst half of 2003 before accelerating again late this year and in 2004. The escalation of world oil prices and uncertainties surrounding the economic effects of the US-led invasion of Iraq are key factors contributing to the current slowdown and clouding near-term economic prospects. While the risks of ongoing military operations--especially the level of casualties and longer-term political consequences--are still diffi cult to assess, the most likely scenario is a rapid removal of the present Iraqi regime without enduring damage to Iraq's economic infrastructure. This should be followed by bounce-back in consumer and business confi dence and in fi nancial market sentiment and by a de-escalation of world oil prices--all contributing to a strengthening of growth in the second half of this year and beyond.

Spatial Comparisons of Poverty and Inequality in Living Standards in Malawi

The paper looks at poverty and inequality across areas in Malawi. The focus is on both monetary (consumption) and non monetary (health and education) dimensions of well being. Stochastic poverty dominance tests show that rural areas are poorer in the three dimensions regardless of poverty line chosen. Stochastic inequality dominance tests find that the north and south dominate the centre in health inequality, and there is no dominance between the north and south. With respect to education inequality, dominance is declared for the south-centre pair only. A sub group decomposition analysis finds that the south contributes the most to consumption and education poverty while the centre is the largest contributor to health poverty. We establish that within area inequalities (vertical inequalities) rather than between area inequalities (horizontal inequalities) are the major driver of consumption, health, and education inequality in Malawi.Poverty; inequality; stochastic dominance; decomposition; Malawi.

Rural-Urban Differences in Parental Spending on Children’s Primary Education in Malawi

The paper investigates two issues regarding household expenditure on primary education of own children using the Second Malawi Integrated Household Survey (IHS2) data. Firstly, we look at factors which influence a household's decision to spend or not (the participation decision), and by how much (the expenditure decision). This is done for urban and rural households. We find that there are differences in the factors which influence both decision levels for the two groups of households. Secondly, to get a deeper understanding of these rural-urban spending differences, the study develops the Blinder-Oaxaca decomposition technique for the independent Double Hurdle model. The proposed decomposition is done at the aggregate and disaggregated levels. The aggregated decomposition allows us to isolate the expenditure differences into a part attributable to differences in characteristics and a part which is due to differences in coefficients. The detailed (disaggregated) decomposition enables us to pinpoint the major factors behind the spending gap. At the aggregate decomposition level, our results show that at least 66% of the expenditure differential is explained by di¤erences in characteristics between rural and urban households, implying that an equalization of household characteristics would lead to about 66% of the spending gap disappearing. At the disaggregated decomposition level, the rural-urban di¤erence in household income is found to be the largest contributor to the spending gap, followed by quality of access of primary schools. Besides, rural-urban di¤erences in mothers education and employment are found to contribute more to the spending differential relative to the same for fathers.

The poverty-inequality relationship in Malawi: A multidimensional perspective

This paper looks at the linkage between poverty and inequality by investigating the poverty impacts of changes in within and between inequalities in Malawi. We recognize the multidimensional nature of both poverty and inequality by focusing on monetary (consumption) and non monetary (health and education) dimensions of well being. Two questions are answered namely; what is the contribution of within-group inequalities (vertical inequalities) to total poverty? And what is the contribution of between-group inequalities (horizontal inequalities) to total poverty? The second integrated household survey (IHS2) is used, and the results differ considerably across the three dimensions of well being. The elasticity of poverty with respect to within-region consumption inequalities is positive and higher than that of between-region inequalities, suggesting that reductions in vertical inequalities in consumption would have a higher poverty reducing effect. Between-region inequalities in health have a larger and positive effect on the health poverty headcount; on the other hand within-region inequalities in health have a larger and positive relationship with the health poverty gap and severity. We also find that an increase in both within and between region education inequalities reduce the education poverty headcount, but increase the education poverty gap and severity.Inequality; poverty; Malawi

Intrahousehold and interhousehold child nutrition inequality in Malawi

The allocation of resources within households may not be equal, and this may lead to different outcomes including health outcomes for household members. This paper investigates whether child nutrition inequalities are attributable to differences between households or differences within households in Malawi. Using a linear model with random effects, we derive a method to estimate the between and within contributions of both the explained and unexplained variances of child nutrition. Child nutrition is measured using height-for-age z-scores, and weight-for-height z-scores. The empirical analysis uses the 2006 multiple indicator cluster survey (MICS) data. We find evidence of within household nutritional bias along gender, age, and birth order lines in Malawi. The results for rural and urban areas, as well as ethnic and religious groups show that nutrition inequalities largely stem from differences within households. Intrahousehold nutrition inequalities are however less explained by observables, while interhousehold inequalities are more explained by observables.Inequality; nutrition; Malawi