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41. The gendered effects of climate shocks on labour and welfare in Zambia

Author:
Alessandra Hidalgo-Arestegui, Patricia Justino, Gabriel Monteiro, Rodrigo Oliveira, and Bruce Sianyeuka
Publication Date:
12-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper exploits several waves of two major nationwide representative surveys to document the impacts of climate shocks on individuals and households in Zambia. We merge these datasets with historical precipitation and temperature data at the district level. First, we show the gendered effects of the shocks, which have a higher negative impact on women. Women have a lower probability of being in the labourforce and fewer hours of work when experiencing shocks. Second, we show that households affected by climate shocks have 16% lower consumption, which is mainly explained by female-headed households. We show that social protection policies mitigate income reduction but not consumption, which may suggest that climate shocks affect households directly by reducing their income, but also indirectly by raising food prices.
Topic:
Climate Change, Labor Issues, Consumption, Gender, and Climate Shocks
Political Geography:
Africa and Zambia

42. Raindrop in the drought? Vulnerability to climate shocks and the role of social protection in Zambia

Author:
Katrin Gasior, Pia Rattenhuber, Adnan Shahir, and Anna Zasova
Publication Date:
12-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Zambia’s reliance on rain-fed agriculture makes its economy and population highly vulnerable to frequent droughts and irregular rainfall. This paper assesses the role of social protection, specifically the Social Cash Transfer (SCT) program, in mitigating drought-induced poverty and consumption declines. Using the MicroZAMOD microsimulation model and districtlevel rainfall data, we find that rainfall shocks significantly increase poverty and reduce household consumption, disproportionately affecting the poorest households. While the current SCT program provides some relief, reforms to eligibility criteria, particularly removing the household composition requirement, could improve targeting, expand coverage, and strengthen resilience against climate-related economic shocks.
Topic:
Agriculture, Climate Change, Tax Systems, Vulnerability, and Social Protection
Political Geography:
Africa and Zambia

43. Tax financing options for new social protection instruments: The equity implications of taxing more to expand the South African social security system

Author:
Maya Goldman and Ntuthuko Hlela
Publication Date:
09-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
In this paper, we use a static fiscal incidence analysis model to evaluate the poverty and inequality impacts of using fiscal policy to finance expanded social spending in South Africa. We assess three methods to enhance the social protection system’s equity objectives: increasing the size and/or coverage of the existing Social Relief of Distress grant and introducing a universal or working-age basic income grant. The implications of financing these reforms are examined using four tax instruments: increasing the value-added tax rate, increasing personal income tax rates, reducing the personal income tax primary annual rebate, and introducing a surcharge on incomes. While we discuss behavioural effects, they are not included in the model. Our analysis indicates that an expansion of the social security system financed through increased taxation could substantially reduce poverty and inequality to varying degrees depending on the taxes and transfers used.
Topic:
Poverty, Inequality, Tax Systems, Fiscal Policy, Social Spending, and Cash Transfers
Political Geography:
Africa and South Africa

44. The sustainability of South African fiscal policy

Author:
Philippe Burger
Publication Date:
09-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The public-debt-to-GDP ratio in South Africa increased from 26 per cent in the 2008/09 fiscal year to 73.9 per cent in 2023/24, raising fears that fiscal policy is not sustainable. This raises the question: did the government take steps to arrest the increase in the debt-to-GDP ratio and regain fiscal sustainability, and if so, why did they fail? Establishing fiscal sustainability can be done directly or indirectly. Doing it directly entails the government increasing the primary balance in reaction to higher debt levels. Hence, this paper presents a fiscal reaction function. The analysis shows that during the period in which the public-debt-to-GDP ratio rose, the primary balance did indeed react to an increased debt burden, but its level remained too low to arrest the increase in the public-debt-to-GDP ratio. The analysis also assesses whether fiscal fatigue set in, wherein the responsiveness of the primary balance to the debt burden is positive but eventually weakens. Some evidence for the presence of fiscal fatigue is present. One indirect approach to establishing fiscal sustainability is through the impact of expenditure and revenue on economic growth. Leaving revenue for further study later, this paper presents an adapted growth equation to investigate the impact on growth of general government investment and consumption expenditure, and of public (and private) corporation investment. While the effect of private sector investment is positive, neither general government nor public corporation investment has a statistically significant impact on growth. Furthermore, government consumption has a negative impact on growth.
Topic:
Investment, Fiscal Policy, Deficit, Sustainability, and Public Debt
Political Geography:
Africa and South Africa

45. Spatial consumption inequality in Mozambique

Author:
Carlos Gradín
Publication Date:
10-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
In this paper, I show that the trend in spatial inequality in Mozambique almost entirely explains the outstanding surge in inequality in the country over the past decade, as well as its decline immediately after the pandemic, in contrast to its secondary role in the earliest years. For this analysis, I use an innovative regression-based decomposition framework based on the Recentred Influence Function to estimate each area’s contribution to inequality and a Blinder– Oaxaca approach to disentangle the nature of their contribution to spatial and non-spatial inequality trends. This rise in inequality was mainly due to a generalized drop in consumption experienced by households in the afflicted rural areas in the north and centre of the country, affected by natural disasters and growing conflict. This was aggravated by disproportionally larger economic growth in two urban areas: the Maputo area, which encompassed the capital, during the expansive phase, and the urban area of coal-rich Tete province during the recession that followed. In more recent years, the crisis disproportionally affected the capital and other urban areas, producing a strong mitigating effect on inequality that might be only temporary. The findings of this research have the potential to significantly inform policy decisions to address inequality in Mozambique, thereby contributing to the country’s economic development substantially.
Topic:
Inequality, Urban, Rural, and Economic Development
Political Geography:
Africa, Mozambique, and Sub-Saharan Africa

46. Spillover effects of the recent US monetary policy shocks on the South African economy: The role of monetary and fiscal policy coordination

Author:
Guangling Liu and Marrium Mustapher
Publication Date:
11-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This study examines how different policy mix regimes affect the impact of recent US contractionary monetary policy on South Africa’s inflation and business cycles. The study uses a small open economy New Keynesian Dynamic Stochastic General Equilibrium model with an integrated fiscal block to analyse these effects. Regime M (active monetary policy) is more effective at containing the spillover effects but leads to higher public debt, requiring larger future fiscal surpluses. The commitment to price stability under Regime M increases real interest rates, raising domestic debt service costs and the debt-to-GDP ratio. Regime F (active fiscal policy), in contrast, stabilizes debt more quickly but at the cost of higher inflation, as it does not use future surpluses to manage public debt. These spillover effects are more amplified under both Regime M and Regime F in the case of a complete exchange rate pass-through and a higher degree of trade openness, with Regime F exhibiting a stronger amplification effect.
Topic:
Foreign Policy, Economics, Monetary Policy, Inflation, and Fiscal Policy
Political Geography:
Africa, South Africa, North America, and United States of America

47. Dancing on the grid: electricity crises, manufacturing energy vulnerability, and jobs in South Africa

Author:
Gideon Ndubuisi, Elvis Korku Avenyo, and Rex Asiama
Publication Date:
06-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
South Africa’s current electricity crises have worsened, placing the country on an uncertain and turbulent economic trajectory. To identify the manufacturing sub-sectors that are most vulnerable to this crises, we use the input–output matrices for the period between 1993 and 2021 to develop a sub-sector energy vulnerability index. Second, we employ the self-constructed energy vulnerability index in a flexible empirical framework to examine the effect of the electricity crises on manufacturing sector jobs in the country. We find that energy vulnerability has a high degree of heterogeneity across manufacturing sub-sectors, highlighting cross-sector differences in the level of exposure and susceptibility to the energy-related crises. Results from the empirical analysis, on the other hand, suggest that electricity crises are associated with significant job destruction, with this adverse effect severe for manufacturing sectors with higher energy vulnerability intensity. The severity of this adverse effect holds irrespective of the nature of jobs, whether formal or informal.
Topic:
Crisis Management, Manufacturing, Electricity, Vulnerability, and Jobs
Political Geography:
Africa and South Africa

48. The experimented society: interventions, social science, and the failure of post-conflict reconstruction in Afghanistan

Author:
Jennifer Brick Murtazashvili
Publication Date:
07-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper critically examines the shortcomings of post-conflict reconstruction efforts in Afghanistan from 2001 to 2021, arguing that an overemphasis on measurable results and causal inference led to overly narrow, community-driven development interventions that failed to appreciate the complex political realities of the country. While these interventions espoused community control, they were in fact the result of a top-down approach reminiscent of earlier state-building efforts, neglected the importance of customary authority structures, and treated Afghanistan as a blank slate for experimentation. Such community-based programmes also lead to a myopic focus on quantifiable metrics at the expense of political considerations, reflecting a broader methodological bias in development studies exemplified by the popularity of randomized controlled trials. Drawing on extensive field observations, the paper contends that such programmes worked against the grain of Afghan society and paradoxically undermined the legitimacy and effectiveness of local governance institutions. The paper concludes by advocating a more holistic, adaptive, and politically informed approach to grassroots development in conflictaffected regions—one that empowers authentic local ownership, aligns with endogenous social and political structures, and grapples with the messy realities of fostering legitimate governance in fragile contexts. The hard-earned lessons from Afghanistan’s recent past should prompt a fundamental rethinking of what constitutes effective development assistance in post-conflict environments.
Topic:
Development, Governance, Reconstruction, and Post-Conflict
Political Geography:
Afghanistan and South Asia

49. Statebuilding in fragile countries: What can we learn from past stateness?

Author:
Andrea Vaccaro and Rachel M. Gisselquist
Publication Date:
08-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Supporting state capacity is a priority for the international community, yet the record of internationally supported statebuilding to date has been mixed at best. A key question for continuing research concerns the factors influencing more versus less successful interventions. We show that the quality of past ‘stateness’ is crucial in understanding contemporary state fragility and statebuilding. Extending beyond previous work, we introduce the concept of past stateness, consider theoretically its relationship to contemporary fragility, and explore this relationship empirically, drawing on cross-national data and newly developed indicators. In line with our expectations, descriptive and inferential analysis shows that lack of experience of two core features of stateness—monopoly of violence and existence of a professional bureaucracy—in the past century predicts chronic fragility today. This association is mainly driven by monopoly of violence rather than existence of a professional bureaucracy. Our analysis sheds new light on the underlying heterogeneity among states today labelled as ‘fragile’. From a policy perspective, a key implication is that, in designing interventions, the most relevant experiences are likely to be from other countries with similar stateness legacies, rather than from ‘fragile states’ more generally. Our analysis does not imply that statebuilding is impossible in contexts with weak stateness legacies, but it does underscore the challenges of this and the importance of setting expectations appropriately.
Topic:
Bureaucracy, State Fragility, Statebuilding, and Monopoly of Violence
Political Geography:
Global Focus

50. Economic geography determinants of spatial wage disparities in South Africa: Evidence from a firm‐level panel

Author:
Sanduku Mulumba, Lawrence Edwards, and David Fadiran
Publication Date:
08-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
In this paper, we use the new economic geography (NEG) framework to estimate the extent to which spatial wage disparities in the South African manufacturing sector are an outcome of economic forces such as market access. To test the relationship, we use the anonymized tax data on employers and employees made available by the South African Revenue Service and National Treasury in collaboration with UNU-WIDER. We first document the key stylized facts that characterize the spatial distribution of wages across regions in South Africa using exploratory spatial data analysis (ESDA) techniques. We then test for the existence of a wage structure across South African local and metropolitan municipalities, controlling for individual and firm characteristics using a two-stage estimation method. Consistent with the NEG predictions, we find that wages are higher in municipalities that are closer to large markets, as measured by the Harris market potential index. However, much of the wage effect is driven by the income and employment density of the municipality’s own market, and not that of surrounding areas. These results point to a combination of large spatial rigidities leading to highly localized effects of market potential, together with wage and productivity effects arising from urban agglomeration economies.
Topic:
Economics, Manufacturing, Wages, and Market Access
Political Geography:
Africa and South Africa

51. Inequality and institutional outcomes in Viet Nam: A combined principal components and clustering analysis

Author:
Thu K. Hoang, Klarizze Anne M. Puzon, Hoai Thi Thu Dang, and Rachel M. Gisselquist
Publication Date:
06-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Better understanding of inequality, including its relationship to governance and other key outcomes, is relevant both to academic researchers and to policy-makers. Nevertheless, efforts to establish causal relationships empirically remain hampered by the quality and availability of data, especially for Global South countries at the sub-national level. This paper draws on newly available data on income inequality in Viet Nam at the provincial level to show how unsupervised learning techniques might be used as tools in consideration of the relationship between inequality and governance. While previous empirical work in this area has largely used standard techniques such as regression analysis aimed at establishing causal relationships, this is often hampered by the quality and availability of data. Adopting a different approach, this paper applies K-means clustering and principal components analysis (PCA) to show how unsupervised learning techniques can provide relevant insight into structures and patterns in data. Using PCA, it identifies two groupings of provinces based on similarities in institutional quality measures. K-means analysis points to similar relative inequality levels but substantially different absolute inequality and income levels, suggesting two broad ‘types’ of provinces. The results are suggestive of the positive impact of initial inequality on institutions and that better quality of institutions might reduce inequality for some groups. In general, increased incomes might imply improved inequality and institutional quality outcomes in some cases. A final section considers key limits to such analysis, alongside extensions and further applications.
Topic:
Governance, Inequality, and Institutions
Political Geography:
Vietnam, Southeast Asia, and Viet Nam

52. From the Bottom 40 to Inequality Lines: Sharing Prosperity Globally and Domestically

Author:
Borja Lopez-Noval, Miguel Niño-Zarazúa, Laurence S. J. Roope, and Finn Tarp
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
A major of focus of global development policy, enshrined in the Sustainable Development Goal target 10.1, is the aim to progressively achieve and sustain income growth of the bottom 40 per cent (B40) of the population at a rate higher than the national average. We propose an alternative approach to assessing shared prosperity, using ‘inequality lines’. Analogous to poverty lines, but focused on inequality, inequality lines are benchmark incomes. Income increases below the inequality line decrease inequality; income increases above the line increase inequality. In contrast to both the B40 approach, and all widely used poverty lines, inequality lines have the advantage that they arise naturally; their location in the income distribution is directly implied by standard inequality indexes, which are underpinned by established normative principles such as the Pigou-Dalton transfer principle. Should official development assistance be used to grow or subsidise those on incomes that are low by global standards, even if this increases domestic inequality? Should instead international resources be used to reduce domestic inequality wherever it is severe, even if this means exacerbating global inequality? Using inequality lines, we investigate the extent to which there may be trade-offs between sharing prosperity domestically versus sharing prosperity globally. Using data from the World Income Inequality Database, we present the most comprehensive empirical study to date of where in the income distribution inequality lines lie in practice, and how they evolved during 1950-2020. With estimates for 208 countries in 2020, we provide the first estimates of these global inequality lines, how the global inequality line percentile has changed over time, and how it compares to domestic inequality lines. For each country, our results illuminate when income growth, subsidies or developmental interventions are likely to be equalising, with respect to both domestic and global income distributions, and where there are trade-offs between the two. We also shed light on where there are important, purely domestic, tradeoffs, between reducing domestic inequality and reducing poverty.
Topic:
Development, Poverty, Inequality, and Sustainable Development
Political Geography:
Global Focus

53. Will economic growth be sufficient to end global poverty? New projections of the UN Sustainable Development Goals

Author:
Arief Anshory Yusuf, Zuzy Anna, Ahmad Komarulzaman, and Andy Sumner
Publication Date:
10-2023
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
In this paper, we present new projections for a range of global poverty-related Sustainable Development Goals (SDGs), specifically, extreme monetary poverty, undernutrition, stunting, child mortality, maternal mortality, and access to clean water and basic sanitation. Our projections, based on economic growth forecasts, take into account recent global shocks such as the COVID-19 pandemic and the inflation shock. Our findings indicate that economic growth alone will not be sufficient to end global poverty, and the global poverty-related SDGs will not be met by a considerable distance. The implication of this, we argue, is that a stronger focus is needed on inclusive growth (SDG-8), and specifically redistribution with growth at global and national levels. This would mean more emphasis on policies to build productive capacities, and the introduction or expansion of income transfers as well as ensuring public investments are sufficient to meet the SDGs. To this end new international financing needs to be made available through debt relief or other forms of finance to expand developing countries’ fiscal space.
Topic:
Poverty, Sustainable Development Goals, Economic Growth, and Inclusion
Political Geography:
Global Focus

54. Barriers or catalysts? Traditional institutions and social mobility in rural India

Author:
Vegard Iversen, Anustup Kundu, Rahul Lahoti, and Kunal Sen
Publication Date:
10-2023
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
We examine how village-level social group dominance affects the educational and occupational mobility of minority and other social groups in rural India across multiple generations. We distinguish between upper caste and own-group dominance and examine the mechanisms underpinning inequality in mobility outcomes. We find inequality in upward educational mobility to have significantly narrowed over time, with Scheduled Castes doing better in upper caste- and own-dominated villages, while Scheduled Tribes and Muslims do worse in own-dominated villages. In contrast, for occupational mobility we find no evidence of minority groups catching up with upper castes; Scheduled Castes and Scheduled Tribes are particularly disadvantaged, but Scheduled Castes, again, do comparatively better in their own-dominated villages. Exploring the mechanisms that explain the relationships between land dominance regimes and mobility, we find that a combination of agroecological and natural resource base and social cohesion of villages underpins the differences observed more than public goods provision. Our findings suggest a new pattern of inequality where historically disadvantaged groups appear less able to convert educational gains into labour market and occupational progress.
Topic:
Education, Inequality, Rural, Social Mobility, and Traditional Institutions
Political Geography:
South Asia and India

55. Wage inequality, firm characteristics, and firm wage premia in South Africa

Author:
Shakeba Foster
Publication Date:
10-2023
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper investigates the role of firm characteristics in driving wage inequality and firm wage premia in the South African labour market. The Abowd, Kramarz, and Margolis (AKM) and Kline, Saggio, and Sølvsten (KSS) regression-based decomposition methods are applied to matched employer–employee administrative tax data for the period 2011–19. Additionally, the Theil index is used as a comparative tool for estimating wage inequality, given that the variance of logarithms applied in the regression-based decomposition methods has been established as an imprecise measure of inequality. The results show significantly high dispersion in wages, as estimated by both the AKM and the KSS methods as well as the Theil index, reaffirming the extent of high inequality in the country. Worker and firm characteristics account for 35 per cent and 18 per cent of wage dispersion, respectively, with a positive worker–firm covariance accounting for 11 per cent. Firm size, industry, profits, geographical location, and whether firms are locally or foreign-owned are found to be important in driving firm wage premia.
Topic:
Labor Issues, Inequality, Economy, and Wages
Political Geography:
Africa and South Africa

56. Will the poverty-related SDGs be met? Global projections for 2030

Author:
Arief Anshory Yusuf, Zuzy Anna, Ahmad Komarulzaman, and Andy Sumner
Publication Date:
10-2023
Content Type:
Research Paper
Institution:
United Nations University
Abstract:
The 1980s are sometimes referred to as the ‘lost decade’ for development. Many countries in the Global South experienced weak or no improvement in poverty indicators. Our projections are equally dire for the current decade and prospects for the SDGs unless action is taken.
Topic:
Poverty, Sustainable Development Goals, and Economic Development
Political Geography:
Global Focus

57. The rise of social protection in the Global South – the role of foreign aid

Author:
Miguel Niño-Zarazúa, Ana Horigoshi, and Alma Santillán Hernández
Publication Date:
10-2023
Content Type:
Research Paper
Institution:
United Nations University
Abstract:
Despite the rapid expansion of social protection across the Global South in recent decades, the ILO (2021: 19) estimates that more than half of the global population still have no access to any form of protection against poverty vulnerability and social exclusion.
Topic:
Poverty, Foreign Aid, and Protection
Political Geography:
Global Focus and Global South

58. Construction productivity and global inequality

Author:
Saumik Paul and Kunal Sen
Publication Date:
11-2023
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Two well established stylized facts of economic development are a strong correlation between investment and income, and large differences in investment rates across countries. Construction is the largest component of investment. This paper examines the implications of heterogeneity in construction productivity on cross-country income disparity. We estimate the 10:1 spread in construction productivity among 145 countries in 2005 as a factor of 61.7-fold. Based on a general equilibrium model with input–output linkages, we find that the 10:1 spread in income per capita declines by 45 per cent when the construction productivity gap is eliminated. Sectoral characterization of the aggregate effect of a change in construction productivity shows heterogeneous sectoral contributions to income convergence. Electrical equipment, metals, and transport equipment play stronger roles in transforming the effect of a change in construction productivity to the aggregate level in China compared with other countries.
Topic:
Inequality, Investment, Productivity, Construction, and Income
Political Geography:
China and Global Focus

59. The political economy of Bitcoin as legal tender in El Salvador: Temporary bandages to permanent wounds?

Author:
Tobias Boos and Juan Grigera
Publication Date:
11-2023
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper provides a contextual analysis of the adoption of Bitcoin as legal tender in El Salvador. First, we outline the historical context and the political situation of the period 2019–24 that serve as context for the passage and implementation of the Bitcoin law (Decree No. 57). We identify the institutional and political context and the main areas of contention. Next, we delve into the macroeconomic context of El Salvador, outlining the fundamental features of its economy and highlighting how they relate to currency issues. Our analysis reveals that the adoption of Bitcoin cannot be understood without factoring in the mounting strains surrounding dollarization, remittances, and foreign debt. We conclude by putting forth a set of hypotheses regarding the potential dynamics and future of Bitcoin as legal tender in El Salvador that point beyond Bukele’s tactics.
Topic:
Debt, Political Economy, Economy, Bitcoin, Digital Currency, Remittances, Dollarization, and Nayib Bukele
Political Geography:
Central America and El Salvador

60. A reform option for pension fund contribution as tax expenditure in South Africa

Author:
Ada Jansen, Winele Ngobeni, and Wynnona Steyn
Publication Date:
11-2023
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
South Africa has a progressive broad-based personal income tax system with relatively few tax expenditures. The two most important are the medical contribution plus additional tax credits for medical expenses, and the deductions allowed for retirement contributions. A pertinent question for tax reform in South Africa is whether redistributive gains can be achieved by restructuring expenditures in the personal income tax system. This paper considers the redistributive implications of converting the tax deduction for retirement contributions to a tax credit. This would build on the gains achieved by introducing a medical tax credit system in 2012. We analyse the tax revenue gains/losses of income groups and in total in terms of distributional effects and progressivity outcomes using a static microsimulation model based on data for the 2019/20 tax year. We find a high concentration of taxpayers in terms of taxable income and retirement contributions. The concentration of contributions is highly skewed towards lower- and middle-income earners, whose annual contribution amounts are low compared with higher-income earners. We recommend a conversion rate that considers the current distribution of taxpayers contributing to retirement funds. Converting the pension contribution deduction to a tax credit would raise additional revenue and make the tax system more progressive, benefiting low-income earners with marginal tax rates of less than the proposed conversion rate. The revenue gained would provide increased fiscal space to fund social expenditure or reduce government debt. Further distributional and behavioural analyses are needed on low-income earners and those earning below/above the minimum tax threshold, to refine understanding of the impact on low-and middle-income earners’ contributions to retirement funds.
Topic:
Economics, Reform, Tax Systems, and Pension
Political Geography:
Africa and South Africa