Zooming in : from aggregate volatility to income distribution
AbstractIn contrast with a growing literature on the drivers of aggregate volatility in developing countries, its consequences in terms of individual incomes have received less attention. This paper looks at the impact of cyclical output fluctuations and extreme output events (crises) on unemployment, poverty, and inequality. The authors find robust evidence that aggregate volatility has a regressive, asymmetric, and non linear impact, as reflected in the strong influence of extreme output drops. The findings show that, in addition to the mitigating role of personal wealth, public expenditure and labor protection exert a similar benign effect. These findings are in line with the income substitutions view of social safety nets, and cast a new light on the value of social programs and labor market regulation in crisis prone developing countries.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 4895.
Date of creation: 01 Apr 2009
Date of revision:
Economic Conditions and Volatility; Emerging Markets; Economic Theory&Research; Inequality;
Other versions of this item:
- César Calderón and Eduardo Levy Yeyati, 2007. "Zooming in: From Aggregate Volatility to Income Distribution," Business School Working Papers 2007-03, Universidad Torcuato Di Tella.
- NEP-ALL-2009-04-25 (All new papers)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Volatility Drives Income Inequality
by vngalasso in Toppling Inequality on 2012-09-08 12:56:43
- Â¿QuÃ© he hecho yo para merecer esto? Crecimiento latinoamericano y viento global
by Luciano in Economista Serial Crónico on 2011-12-01 00:58:00
- ¿Qué he hecho yo para merecer esto? Crecimiento latinoamericano y viento global
by Eduardo Levy-Yeyati in Foco Económico on 2011-11-30 12:00:00
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