A workshop held at the IMF on April 1213, 2000, considered the effects of macroeconomic policies, economic crises, and IMF-supported programs on income distribution and poverty in various countries. Several studies of work in progress were presented by IMF economists and then opened for discussion by experts from academia, the World Bank, and other research institutions. These studies will be revised, taking into account the points made in the discussions, and many will be issued later this year as working papers or policy discussion papers and posted on the IMF’s website. A list of the workshop papers along with brief summaries of their preliminary findings follow.

Abstract

A workshop held at the IMF on April 1213, 2000, considered the effects of macroeconomic policies, economic crises, and IMF-supported programs on income distribution and poverty in various countries. Several studies of work in progress were presented by IMF economists and then opened for discussion by experts from academia, the World Bank, and other research institutions. These studies will be revised, taking into account the points made in the discussions, and many will be issued later this year as working papers or policy discussion papers and posted on the IMF’s website. A list of the workshop papers along with brief summaries of their preliminary findings follow.

Summary by Paul Cashin, Paolo Mauro, and Catherine Pattillo

A workshop held at the IMF on April 1213, 2000, considered the effects of macroeconomic policies, economic crises, and IMF-supported programs on income distribution and poverty in various countries. Several studies of work in progress were presented by IMF economists and then opened for discussion by experts from academia, the World Bank, and other research institutions. These studies will be revised, taking into account the points made in the discussions, and many will be issued later this year as working papers or policy discussion papers and posted on the IMF’s website. A list of the workshop papers along with brief summaries of their preliminary findings follow.

Economic Growth and Poverty Reduction in Sub-Saharan Africa

Toshihiro Ichida (Columbia University) and Gary Moser (IMF)

Discussant: Ibrahim A. Elbadawi (World Bank)

Transitional Growth with Increasing Inequality and Financial Deepening

Robert Townsend (University of Chicago) and Kenichi Ueda (IMF)

Discussant: Angus Deaton (Princeton University)

India’s Interstate Poverty Dynamics

Jahangir Aziz (IMF)

Discussant: Xavier Sala-i-Martin (Columbia University)

The Impact of Public Education Expenditure on Human Capital, Growth, and Poverty in Tanzania and Zambia: A General Equilibrium Approach

Hong-Sang Jung (IMF) and Erik Thorbecke (Cornell University)

Discussant: François Bourguignon (World Bank)

The Economic Consequences of HIV/AIDS in Southern Africa

Markus Haacker (IMF)

Discussant: John Cuddington (Georgetown University)

The Gender Gap in Education in Eritrea

Zuzana Brixiová, Ales Bulír (IMF), and Joshua Comenetz (University of Florida)

Discussant: Susan Razzaz (World Bank)

Migration, Human Capital, and Poverty in a Dual-Economy Model of a Developing Country

Paul Masson (IMF)

Discussant: Oded Galor (Brown University)

Financial Crises and Poverty

Emanuele Baldacci, Luiz de Mello, and Gabriela Inchauste (IMF)

Discussant: Nora Lustig (Inter-American Development Bank)

The Distributional Effects of Macroeconomic Crises: Microeconomic Evidence from Russia

Stephanie Eble and Petya Koeva (IMF)

Discussant: David Sahn (Cornell University)

How Volatile and Predictable Are Aid Flows, and What Are the Policy Implications?

Ales Bulír and Javier Hamann (IMF)

Discussant: T. N. Srinivasan (Yale University)

Changes in the Structure of Earnings During a Period of Rapid Technological Change: Evidence from the Polish Transition

Michael Keane (New York University and Yale University) and Eswar Prasad (IMF)

Discussant: Susan Collins (IMF)

Debt Relief, Poverty, and Income Distribution

Era Dabla-Norris, John Matovu, and Paul Wade (IMF)

Discussant: Shantayanan Devarajan (World Bank)

Hiccups for HIPCs

Craig Burnside (World Bank) and Domenico Fanizza (IMF)

Discussant: Kenneth Kletzer (IMF)

Panel Discussion on Macroeconomic Policies and Poverty Reduction

Angus Deaton (Princeton University), T. N. Srinivasan (Yale University), Nicholas Stern (World Bank), and Robert Townsend (University of Chicago)

The papers presented at the workshop covered a wide range of topics concerning the relationships between macroeconomic developments and policies on the one hand and income distribution and poverty on the other. The papers can be classified into the following five broad categories.

Studies that use longitudinal microeconomic data (household income and expenditure surveys) for one country to measure the impact of macroeconomic or structural adjustment and economic crises on households’ living standards:

  • Eble and Koeva analyze the consumption of Russian households before and after the 1998 economic crisis. They estimate that real household consumption fell by about one-third following the crisis and households without access to land suffered the greatest losses because they were unable to substitute self-produced foods for previously purchased foods.

  • Keane and Prasad use data on individual workers’ earnings in Poland in the years 198596 to analyze changes in cross-sectional labor earnings inequality during the economic transition. They find that while education premia rose sharply, experience premia fell markedly, especially in the early years of the transition.

  • Baldacci, de Mello, and Inchauste use Mexican household survey data to estimate the increase in the number of individuals living in poverty as a result of the financial crisis of the mid-1990s. Controlling for a host of factors, they find that the adverse impact of the crisis was greater on urban households than on rural households. These results are complemented by a broader analysis of the relationship between currency crashes and poverty for a panel of countries.

    Studies that use panels of countries or regions within countries to examine the impact of macroeconomic developments on poverty:

  • Ichida and Moser use non-income measures of poverty (infant mortality, life expectancy, and school enrollment) for 46 countries in Sub-Saharan Africa over the last three decades. They confirm the existing consensus that economic growth is robustly related to poverty reduction.

  • Aziz draws on data of poverty levels for separate states of India over the last two decades. He looks at whether economic growth has been beneficial for the poor and whether it has narrowed interstate differences in rural poverty levels.

    Studies that apply calibration, computable general equilibrium, or theoretical models to macroeconomic and poverty issues in developing countries:

  • Townsend and Ueda develop a model of financial deepening, economic development, and inequality. They calibrate the model using parameters estimated from Thai data.

  • Dabla-Norris, Matovu, and Wade use a model calibrated to household data for Zambia to simulate the effects of various alternative uses of HIPC-related debt relief. They estimate that the greatest impact in reducing poverty and boosting economic growth occurs if debt relief savings are used to raise fiscal expenditure on primary education.

  • Jung and Thorbecke apply a computable general equilibrium model to Tanzania and Zambia. They estimate that the expected boost to education and health spending, arising from HIPC-related debt relief, will substantially increase output growth and the relative wages of low-skilled workers.

  • Masson develops a theoretical model that combines features of the Harris-Todaro model of rural-urban migration with features of models of human capital acquisition under imperfect capital markets and heterogeneous abilities. He explores the consequences on wealth inequality levels of migrations that are driven by the desire of workers to acquire skills.

    Studies that focus on the macroeconomic implications of external aid and debt relief related to the Highly-Indebted Poor Countries (HIPC) initiative, and on how these aid programs affect poverty reduction and optimal macroeconomic policy:

  • Bulír and Hamann use data for a panel of countries to show that international aid flows are more volatile than domestic fiscal revenues, and that they are mildly procyclical.

  • Burnside and Fanizza develop a macroeconomic model that considers the consequences of HIPC debt relief and the implications for desirable fiscal and monetary policies. They examine whether particular attention should be paid to possible increases in inflation resulting from debt relief.

    Studies that analyze a specific country or broader region to yield insights into the relationship between epidemics or gender issues and economic growth:

  • Haacker documents the macroeconomic impact of the HIV/AIDS epidemic on countries in southern Africa and traces its consequences using a neoclassical growth model.

  • Brixiová, Bulír, and Comenetz report on the widening gender gap in education at the national level in Eritrea during the last decade, and at the continuing large disparities at the regional level as well. They point out how this is likely to have negative long-term consequences on both economic growth and poverty reduction.