Economic Mobility: Growth and Equality of Opportunities · 2017-03-29 · Growth and equality of...

Economic Mobility Growth and equality of opportunities:

The Asia Foundation’s contribution

Véronique Salze-Lozac’h Senior Director of Economic Development

Colombo - August 2014

WHAT IS ECONOMIC MOBILITY? WHY IS IT IMPORTANT? HOW IS IT MEASURED?

What is Economic Mobility?

The ability of individuals, families, or groups to move up or down

the income distribution (moving between income quintiles)

The American Dream….

Why it is important?

Dynamic indicator allowing for a qualitative/quantitative assessment of growth

Growth – economic opportunities Poverty – Inequality Social stability, health, crime,

Different Levels of Economic Mobility

Individual and Family Level • Better economic opportunities higher income for

individuals and families

Country-Level • Economic dynamism higher GDP growth

WWW.BIT.LY/1KDLJLY GAPMINDER GRAPH: Growth of Asian countries

Economic Mobility &

GNI Per Capita

Asia countries ranking (World Bank)

Asia

Asia

Asia

High-Income Economies - Hong Kong SAR, China - Japan - South Korea - Macao SAR, China - Singapore

Middle- Income Economies - Bhutan - China* -Indonesia -India - Lao PDR - Malaysia* - Maldives* - Mongolia - Pakistan -Philippines - Sri-Lanka - Thailand* - Timor-Leste - Vietnam

Low-Income Countries -Afghanistan - Bangladesh - Cambodia - North Korea - Myanmar - Nepal

*Upper-Middle Income Economies

Different Types of Economic Mobility

ABSOLUTE RELATIVE

INTRA-GENERATIONAL

INTER-GENERATIONAL

Someone’s income increasing from

$20,000 to $40,000

Someone’s income increasing from

$20,000 to $40,000, whilst others have

increased to $60,000

Someone earning $40,000, whilst their

parents were earning $20,000 at the same point in their career

Someone’s income places them at the

80th percentile of income distribution,

where as their parents were at the 70th

percentile

Measuring Economic Mobility

Income • Intergenerational

Earnings Elasticity • Purchasing Power

> Multi-Dimensional > Comprises Earnings, Income, and Wealth > Non-Constant – varies amongst segments of the population

Poverty • Extreme poverty • Urban vs Rural Poverty

Inequality • % Income Share • Pareto-Lorenz • Gini Index

Economic Mobility &

POVERTY

China and India

www.bit.ly/1zLCNn6

Economic mobility and inequality: Not a straightforward relationship

• Lack of economic mobility can lead to increased inequality… but not necessarily

• Countries with high economic mobility can also have high inequality

Intergenerational earnings elasticity

Correlation between GINI and Intergenerational Earnings Elasticity

Inte

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PATHWAYS FOR IMPROVING ECONOMIC MOBILITY

Equality of Opportunity

Key Elements of Economic Mobility

3. Social Safety Nets – Health,

Housing, Pension, Employment

2. Free & Supportive

Business Environment &

Trade

4. Budgetary & Fiscal Policies

1.Education & Training

Economic mobility

Social capital

Human capital

Financial capital

Supporting pillars

Singapore as the archetype of positive economic mobility?

- Human capital development (education/training - migration)

- Ease of doing business - Trade and globalization - Open and transparent

processes - Social Policies (e.g. public

housing, pension, healthcare)

Policies that stifle economic mobility: Non redistributive tax system?

• Family • Skills and education of

parents • Networks – school,

college, work, community

Examples of The Asia Foundation actions :

• Access to information and knowledge

• Networking (SAWES) • Public-Private

Dialogues

• Savings • Wealth – home or

land ownership, inheritance

• Credit

Examples of The Asia Foundation actions : • Access to credit (BG, CH) • Land reform (PH)

• Education • Social safety nets • Access to

employment

Examples of The Asia Foundation actions :

• Political strategies • Budgetary policies • Decentralization • Training and

Mentoring

GENDER DIMENSION • access to education • employment rates • entrepreneurship,

etc.

MIGRATION Geographic mobility as a key factor for economic mobility

Examples of The Asia Foundation actions :

• Scholarships,

education • Women Economic

Empowerment • Migration

Supporting Increased Economic Opportunities

• Economic Governance Index • Public-Private Dialogues • Political Economy for Reforms

Country-Level Economic Mobility

• Human Capital (Quality Education)

• Innovation and IPR • Investments (Infrastructure…) • Strong Governance • Global and Regional Economic

Cooperation

Questions

Does economic mobility increase

inequality?

Is increased inequality the symptom or the cause of economic mobility?