Magnitude X on the Richter Scale: Welfare Cost of Business Cycles in Developing Countries
AbstractEconomic fluctuations are much stronger in developing countries than in the United States. Yet, while a large literature debates what constitutes a reasonable estimate of the welfare cost of business cycles in the US, it remains an open question how large that cost is in developing countries. Using several model economies, we provide such a measure for a large number of low--income countries. Our first main result is that the welfare cost of output fluctuations per se is far from trivial in those countries, and typically averages 15 to 30 times the corresponding estimate for the US. Our second major result is that, in many poor countries, that cost may in fact exceed the welfare cost of significantly lower growth.
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Bibliographic InfoPaper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number 124.
Length: 15 pages
Date of creation: Oct 2000
Date of revision:
Publication status: forthcoming in the International Economic Review, 2002, new title On the Welfare Cost of Economic Fluctuations in Developing Countries
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business cycles; consumption volatility; welfare cost;
Other versions of this item:
- Stephane Pallage and Michel A. Robe, 2001. "Magnitude X on the Richter Scale: Welfare Cost of Business Cycles in Developing Countries," Computing in Economics and Finance 2001 97, Society for Computational Economics.
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
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