Constructing Fama-French Factors from style indexes: Japanese evidence

One feature that potentially makes the Fama-French (FF) three-factor model less appealing than the Capital Asset Pricing Model (CAPM) is the complexity of the FF model versus simplicity of the CAPM. This motivates us to construct simple benchmarks for FF factors in Japanese market by using four commercially available Daiwa style indexes. The performance of benchmark choice is evaluated through a direct and simple generalized method of moments (GMM) test. Our simply constructed FF factors can explain returns on 33 industry indexes of all common stocks listed on the first section of Tokyo Stock Exchange. Taken FF risk premiums into consideration, finding on a reversal of size effect during post-bubble period confirms similar findings from previous literature.

Using Simple Cross-country Comparisons to Guide Measurement: Poverty in the CFA Franc Zone

In order to inform discussions on the extent of poverty in a country, it is often useful to compare the country’s poverty measures to estimates obtained in other countries with similar levels of development within the same region of the world. This short dissemination note provides estimates of poverty for countries from the Franc CFA zone and shows how simple cross-country poverty comparisons were used to inform poverty measurement in these countries.Poverty, Franc CFA zone, cross-country comparisons

Government Programs and Poverty

The strategy of the Zedillo Administration for the reduction of poverty relied on both broad-based social expenditures and targeted poverty programs. Broad-based social expenditures are devoted to the areas of social security and healthcare, education, job training, and housing. Targeted poverty programs focus on investing in the human capital of the poor, promoting income and employment opportunities for the poor, and improving the physical infrastructure of poor areas. Public funding for targeted programs has increased much faster over the last dozen years than the programmable budget. Within targeted spending, half of the funds are devoted to human capital, a third to physical infrastructure, and the rest to income opportunities. This paper is based on the poverty assessment for Mexico completed by the World Bank. It evaluates the impact of government programs and policies on poverty. After summarizing the key findings through 10 strategic questions, the paper reviews broad-based social expenditure and government programs targeted to the poor.Mexico; poverty; government programs; impact evaluation

Is there a divergence between objective measures and subjective perceptions of poverty trends? Evidence from West and Central Africa

Several sub-Saharan African countries have succeeded at increasing their economic growth rate in recent years, and this has translated into substantial poverty reduction according to objective measures based on household survey data. At the same time, many people do not feel that the poverty situation has been improving in their country or community, and this is a source of concern for elected policymakers. To what extent is there a divergence between objective measures and subjective perceptions of poverty trends, and what may explain this divergence? The objective of this short dissemination note is to document and discuss this issue using data from West and Central Africa and results from a series of poverty assessments recently completed at the World Bank.Poverty; Perceptions; Vulnerability; Social Services; Africa

Microdeterminants of consumption, poverty, growth, and inequality in Bangladesh

Using household data from five successive national surveys, the author analyzes the microdeterminants of (and changes in) consumption, poverty, growth, and inequality in Bangladesh from 1983 to 1996. Education, demographics, land ownership, occupation, and geographic location all affect consumption and poverty. The gains in per capita consumption associated with many of these household characteristics tend to be stable over time. Returns to demographics (variables in household size) have the greatest impact on growth, perhaps because of improving employment opportunities for women. Education (in urban areas) and land (in rural areas) contribute most to measures of between-group inequality. Location takes second place, in both urban and rural areas. The author introduces the concept of conditional between-group inequality. Existing group decompositions of the Gini index along one variable do not control for other characteristics correlated with that variable. Conditional between-group Ginis avoid this pitfall. He also shows how to use unconditional and conditional between-group Ginis for simulating policies.Health Monitoring&Evaluation,Environmental Economics&Policies,Services&Transfers to Poor,Public Health Promotion,Housing&Human Habitats,Inequality,Poverty Assessment,Environmental Economics&Policies,Services&Transfers to Poor,Safety Nets and Transfers

Growth, poverty, and inequality : a regional panel for Bangladesh

Most empirical work on how growth affects poverty and inequality has been based on international panel data sets. Panels can also be used within a country, if the analysis is carried out at the regional level. The author does this for Bangladesh, where regional panel estimates indicate that growth reduces poverty in both urban and rural areas. Growth is associated with rising inequality only in urban areas. Simulations based on these estimates indicate how much poverty reduction could increase in the next 10 years if growth were promoted in rural areas rather than urban areas.Services&Transfers to Poor,Economic Conditions and Volatility,Public Health Promotion,Health Monitoring&Evaluation,Environmental Economics&Policies,Governance Indicators,Poverty Assessment,Services&Transfers to Poor,Rural Poverty Reduction,Achieving Shared Growth

Between group inequality and targeted transfers

The author provides two extensions to Yitzhaki and Lerman's group decomposition of the Gini index. First, he analyzes stratification (within the group) and inequality (between groups) along several dimensions at once. This makes the determinants of inequality more understandable. Second, he derives the impact on the Gini of marginal changes in income or consumption by group. This can be used to evaluate targeted redistributive policies or to assess the impact of exogenous shocks by group. He applies the analysis to data from Bangladesh, with a focus on how inequality affects land ownership, education, and occupation. Education appears to be a stronger determinant of inequality than occupation, with land ownership ranking third. Marginal targeted transfers and taxes have more effect on redistribution when applied to education (from the well-educated to the illiterate) or occupation groups (from officials and managers to tenants and agricultural workers).Services&Transfers to Poor,Environmental Economics&Policies,Economic Theory&Research,Poverty Impact Evaluation,Drylands&Desertification,Inequality,Environmental Economics&Policies,Poverty Impact Evaluation,Services&Transfers to Poor,Rural Poverty Reduction

May growth lead to higher deprivation despite higher satisfaction ?

In a relative deprivation framework, unless inequality is reduced, growth is associated with both higher satisfaction and higher deprivation. This may help explain the discontent with growth despite its benefits. As is well known in the literature, knowledge of the population's mean income and Lorenz curve is all that is needed to analyze a distribution, so that this can also be used to assess the satisfaction and deprivation of each individual. Given the normalization used to derive the satisfaction and deprivation measures, satisfaction and deprivation add up to the mean income for the population as a whole as well as for each individual.Economic Theory&Research,Inequality,Poverty Impact Evaluation,,Labor Policies

Analyzing Debt Sustainability: Concepts and Tools Applied for Guinea, Rwanda,and Senegal

A sustainable debt is a precondition for sustainable development. Yet the analysis of a country’s debt sustainability is a complex task given issues related to (1) establishing the actual debt outstanding and future debt-service obligations; (2) defining appropriate sustainability indicators; and (3) projecting future macroeconomic variables like gross domestic product, exports, interest rates, inflation rates, and exchange rates. These projections are crucial because debt sustainability analysis is necessarily forward-looking and highly sensitive to changes in these macroeconomic variables. This paper provides a case study of debt sustainability analysis in three African countries to illustrate the key concepts and complexities involved in such analysis. We begin with an overview of the main debt sustainability indicators as they typically are used in practice. We then provide a brief historical review of previous and current debt relief initiatives and illustrate how they have been applied in each of the three countries. The paper then presents the debt sustainability analyses using a recently developed simulation tool (SimSIP Debt).Debt sustainability; macroeconomic projections; debt relief

Poverty and Inequality

While there are different estimates of poverty in Mexico, there is general agreement that poverty is widespread, and that the reduction of poverty should be a key area of focus for the new Administration. Beyond lack of income, poverty is a complex and multidimensional phenomena which affects many areas of the life of the poor. As a result, a wide range of public policies have been implemented in Mexico, as elsewhere, to reduce poverty and improve the well-being of the population. This paper has two objectives. First, it briefly presents a framework that could be used by the new Administration to prepare a coherent strategy for poverty reduction. Second, it provides a synthesis of eight background chapters devoted to government programs, social protection, education, health, urban labor markets, rural development, indigenous peoples, and gender that all relate to poverty in Mexico.Mexico; poverty; inequality