Economic Pie Research Articles

Wealth Accumulation: The Good, the Bad and the Ugly

AbstractThis article examines the social and economic impact of the greatly vaunted process of personal wealth accumulation. Recent decades have seen a significant surge in the level of privately owned wealth in the UK, other rich nations and globally. Yet this wealth boom is not associated with an historic boost in innovation and business performance or a faster rate of growth. The article examines the case for distinguishing between ‘good’ and ‘bad’ wealth. ‘Good’ wealth derives from activity which contributes to the common good and wider societal progress, while ‘bad’ wealth occurs when disproportionate and unmerited power is used to seize a larger slice of the economic pie at the expense of others. The evidence is that a significant proportion of growing wealth pools has come through appropriation and transfer, imposing widespread costs on society. Tackling this requires governments to adopt strategies to boost good and limit bad wealth accumulation.

Shared prosperity characterized by four development goals: pro-poor growth, pro-poor development, inclusive growth, and inclusive development

This paper is on shared prosperity and its measurement. Economic growth enhances total prosperity, increasing the economic pie in society, but the pie distribution determines how the population shares the pie. Based on a social welfare framework, we have developed an integrated methodology to evaluate growth and distribution simultaneously. Linking the two phenomena gives rise to four development goals: (i) pro-poor growth, (ii) inclusive growth, (iii) pro-poor development, and (iv) inclusive development. These four goals provide an alternative characterization of shared prosperity. The paper defines the four goals, providing a methodology to operationalize them using real-world data. The empirically measured goals inform at what rate the shared prosperity is enhancing in any country or the world. The methodology is applied globally to determine whether the growth and development have been pro-poor and inclusive in 173 countries over the two decades in the new millennium.

ICT interaction with trade, FDI and financial inclusion on inclusive growth in top African nations ranked by ICT development

The significance of ICT (information and communication technology) framework in efforts to attract foreign investment (FDI), sustain commerce, and boost financial inclusion for enhanced inclusive growth has revolutionized the global system recently. Furthermore, earlier researches on the connection between ICT and growth concentrated more on general expansion than on the kind of growth that is evenly distributed and has broader societal implications than merely growing the size of the overall economic pie. This study critically analyzes the connection between ICT diffusion and inclusive growth, considering the interactive impacts of trade openness, FDI, and financial inclusion on inclusive growth in top African nations ranked in terms of ICT development, so as to close the existing literature gap. An improved-GMM (generalized method of moments) technique, founded on panel data-set spanning the years 2000–2020, is used in the study. By employing PCA (principal component analysis) to measure inclusive growth, ICT diffusion, and financial inclusion indices, the study contributes to the body of prior research. The model also accounts for the heterogeneous impact of the interactive term between ICT diffusions and trade openness, FDI, and financial inclusion on inclusive growth. Overall, results indicate that while ICT diffusion, trade openness, FDI, and financial inclusion significantly and positively enhance inclusive growth at both the individual and interaction levels, inflation hinders it. The study suggests that policymakers should establish measures to advance ICT development, encourage trade openness, attract foreign direct investment, and improve financial inclusion because these measures have tendencies to support inclusive growth by opening up a number of opportunities.

ANTITRUST AND INEQUALITY

ANTITRUST AND INEQUALITY

Making reform and stability compatible with each other: elite redeployment in Meiji Japan

AbstractNineteenth-century Japan remains a void in the literature on institutions and growth. Developmental institutions evolved in Japan after the Meiji Restoration despite the absence of political participation. Authoritarian change agents usually face a trade-off between reform and stability: they have coercive power to remove underproductive institutions, but at the risk of inviting instability, as politically influential deprivileged elites may engage in counteraction to recover what they perceive as their entitlement. Many authoritarian regimes, thus, coopt elites by allowing them access to rent, but such buying-off inevitably compromises institutional improvement. How did Meiji Japan overcome this dilemma and liberate major fiscal and administrative spaces for productive players who generate wealth and increase the size of the economic pie for society? This article presents a model that it calls ‘elite redeployment’ to answer this puzzle. In lieu of elite bargains in participatory polities in Europe, the revolutionary authoritarian regime in Japan coercively deprivileged traditional elites and redeployed those with financial or human capital among them in productive institutions. By doing so, the Japanese authoritarian change agents dismantled the incumbent institutions in an irreversible manner and swiftly built new institutions such as modern administrative, educational, financial, and commercial sectors, while maintaining stability.

Improved solutions for shared value creation and maximization from used clothes: Streamlined structure of clothing consumption system and a framework of closed loop hybrid business model

Underutilization, downcycling, and landfilling of clothes and their material remain challenging problems of the current clothing consumption system (CCS). Past research and the stakeholders of CCS recognize the circular economy as a solution. However, a review of CCS's existing structure, past research, and publicly available information on its industry practices and solutions reflect potential oversight and partial adoption of the circular economy and the unintended loss of value and market share for brands. Our investigation shows that around two-thirds of sample three hundred brands and brand owners do not engage in value maximization activities from used clothes. Furthermore, only four percent of the sample engages in upcycling, and it remains a niche activity as the availability of similar used clothes remains a primary barrier in scaling it up. This analytical investigation proposes an explicit CCS structure. It supports it with a customizable framework of a closed-loop hybrid business model (CLHBM) as an improved solution to scale up and accelerate reuse, upcycling, and recycling of used clothes. It uses a hypothetical example and stylized model to illustrates the potential of CLHBM-approach to generate higher margins and increase the economic pie for brands while reducing the virgin material pie and increasing the product and material life compared to business-as-usual-approach. The paper concludes with a discussion and recommendations for proposed solutions' successful implementation.

National Polar Research as a Manifestation of Turkey’s Soft Power

In the global economy of the 21st century, the production of information and technology and the process of its transformation into economic benefit have become the most important parameter in the relative distribution of power among states. Intending to have a larger share of the global economic pie, Turkey has been trying to conduct an efficient public diplomacy process. Turkish Polar Scientific Expeditions and Researches, which are conducted with national and international academic partnerships, are examined in the context of soft power and public diplomacy. The aim of this study is, as a successful public diplomacy case, to present the prospective contributions of these researches to Turkey’s soft power capacity from science diplomacy perspective.

Unsustainable Family Business in Saudi Arabia - The Roadmap Ahead

Family businesses play a crucial role in the global economy. The GCC especially the Kingdom of Saudi Arabia occupies a significant place in the global economic pie. It offers many employment opportunities to the Saudi and non-Saudi nationals and contributes a significantly to the GDP. According to the government sources there are an estimated 538,000 family businesses in the Kingdom and together this family business cluster contributes approximately 216 billion dollars to the national GDP and provides employments to approximately 7.2 million workers that constitute about 52 percent of the total workforce. Beside such a great potential there are only a few of them can thrive and survive in the present circumstances in the market. Just a third of family businesses are successful thanks to a new generation of entrepreneurs in command. Future success depends to a large extent on the successive achievements of these newly minted entrepreneurs and sustainability of family businesses of such companies in the past affects the success of future generations of these family businesses. There are many challenges these family businesses are facing once left them unattended may cause them to fail is the focus of this study. Hence there is a need to focus on several attributes of sound management in order to be able to continue and grow to remain sustainable would be contribution of this study. The purpose of this study therefore is to identify the various success factors associated to the question of unsustainability of these family businesses (FB) in Saudi Arabia (KSA). Our understanding indicated that Family Businesses (FB) is short-term oriented. For sustainability these FBs need to create and give more importance to factors such as strategic thinking, to train next of kin to ensure succession planning and sound corporate governance for business longevity. As recommendation the immediate family members and potential business leaders emerging from the younger generations need to be trained for their business continuity and survival.

Inclusive growth and environmental sustainability: the role of institutional quality in sub-Saharan Africa.

Growth and environment literature has gained much attention in recent times. However, the emphasis was laid on the conventional economic growth or gross domestic product at the expense of the category of growth that is evenly shared and whose social benefits are far reaching than just an increase in the overall economic pie. It is on this note that the present paper looks at the type of relationship between growth and environment with particular emphasis on growth that is all inclusive. Data are sourced from World Governance and Development Indicators (WGI and WDI) and an index of inclusive growth constructed using principal component analysis (PCA). The findings indicate that institutional quality plays a major role in enhancing growth-environmental sustainability. The results further find a new phenomenon called environmental inclusive-growth Kuznets curve (EIKC) and added to the EKC debate. That is, at the early phase of inclusive growth, environmental degradation rises as well but environmental quality improves with the rise in inclusive growth at a higher phase of the relationship. The study recommends that policymakers should encourage the economies of sub-Saharan Africa to pursue inclusive growth and not compromise it for sustainability since sustainability comes later. Institutional quality which serves as a transmission mechanism in the study can as well be used as a robust and efficient structure to avoid adverse environmental externalities of inclusive growth.

Pakistan’s Defense Budget: Myths & Realities

The Pakistani defense budget is an issue that vested interests have sought to politicize through the dissemination of myths and fabrications. This working paper seeks to dispel those myths by drawing upon international databases of international military spending, as well as budgetary documentation from the Government of Pakistan. The findings of the working paper suggest that the politicization of the defense budget reflects vested interest efforts to seize a larger share of a stagnant economic pie, and should be instead driven by fact-based analyses that consider the defense budget in a wider fiscal context.

COVID‐19 and the Future of CSR Research

COVID‐19 and the Future of CSR Research

The Illusory Promise of Stakeholder Governance

To address growing concerns about the negative effects of corporations on their stakeholders, supporters of stakeholder governance (“stakeholderism”) advocate a governance model that encourages and relies on corporate leaders to serve the interests of stakeholders and not only those of shareholders. We conduct a conceptual, economic, and empirical analysis of stakeholderism and its expected consequences. Stakeholderism, we conclude, is an inadequate and substantially counterproductive approach to addressing stakeholder concerns. To assess the promise of stakeholderism to protect stakeholders, we analyze the full array of incentives facing corporate leaders; empirically investigate whether they have in the past used discretion to protect stakeholders; and show that recent commitments to stakeholderism were mostly for show rather than a reflection of plans to improve the treatment of stakeholders. Our analysis indicates that, because corporate leaders have strong incentives not to protect stakeholders beyond what would serve shareholder value, acceptance of stakeholderism should not be expected to produce material benefits for stakeholders. Furthermore, we show that acceptance of stakeholderism could well impose major costs. By making corporate leaders less accountable and more insulated from shareholder oversight, acceptance of stakeholderism would increase slack and hurt performance, reducing the economic pie available to shareholders and stakeholders. In addition, and importantly, by raising illusory hopes that corporate leaders would on their own protect stakeholders, acceptance of stakeholderism would impede or delay reforms that could bring real, meaningful protection to stakeholders. The illusory promise of stakeholderism should not be allowed to advance a managerialist agenda and to obscure the critical need for external interventions to protect stakeholders via legislation, regulation, and policy design. Stakeholderism should be rejected, including and especially by those who take stakeholder interests seriously. Presentation slides for this paper are available on SSRN here. This paper is part of a larger research project of the Harvard Law School Corporate Governance on stakeholder capitalism and stakeholderism. Other parts of this research project include For Whom Corporate Leaders Bargain by Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita and Will Corporations Deliver Value to All Stakeholders?, by Lucian A. Bebchuk and Roberto Tallarita.

Regional Inequalities, Childhood Socioeconomic Conditions and Adult Life Outcomes — Evidence from Pakistan

The circumstances during early years of life wieldasignificant impact on adult life outcomes by influencing and altering the cognitive, social and personality development of individuals. While these, in turn, are determined largely by the parental socioeconomic status which, in great part, depends on prosperity of the regions within which they dwell. This study assessed the relationship among regional inequalities, its influence on early life conditions and the consequent transmission toadult life in the shape of socioeconomic outcomes. For this purpose, secondary data on Pakistans regional, economic and sociodemographic indicators was utilized. Results confirmed the significance of regional disparities over living conditions at the start of life and lifelongsocioeconomic outcomes. A just spread of the economic pie among the regions can improve socioeconomic and living conditions at individual level. This can have favorable implications in the shape of healthy and productive adults.

Analytical tools beyond Gini index to study inequality: a case of City of Blitar, East Java, Indonesia

This paper demonstrates the use of some analytical tools beyond usual Gini index to study inequality in the City of Blitar (henceforth, Blitar), East Java, Indonesia. The Blitar’s mid-term development plan has set social and macroeconomics indicators as basis to evaluate how local development is carried out by the city government. Of the government’s primary concerns is how the city’s economic pie is distributed between its citizens. As in many other places or context, Gini index has long been a to-go indicator to gauge inequality at first glance. Gini is in fact a never obsolete since it has many desirable properties to be a good indicator for inequality. However, it is necessary to go deeper so the policy makers would better understand the inequality decomposition and dynamics. Attempts to understand inequality should also include an assessment whether the observed growth is pro-poor. Better equality and pro-poor growth make quality growth, which is a primary dimension of sustainable development goals. This paper offers rather comprehensive yet practical guidance for policy analysts or planning practitioners to study inequality in a more meaningful way.

Trust, Beliefs and Cooperation: Excavating a Foundation of Strong Economies

We use a two-phase experimental design to study how systematically manipulated beliefs about trust and trustworthiness can promote or deter cooperation. We use decisions in an initially played trust game to create five environments that differ in the information subjects have about the relative trust/trustworthiness of fellow group members when they make a voluntary contribution decision in our experiment’s second phase. We find that perceived high trusting environments are treated equivalently to ones of perceived high trustworthiness, with both positively affecting subjects’ first-order beliefs about the cooperativeness of group-mates, and in consequence, leading to higher contributions. Our results indicate that people cooperate more and hence produce more together in an environment of high trust/trustworthiness, indicating one channel through which trust helps to grow the economic pie.

Poverty and inequality impact of a natural disaster: Myanmar’s 2008 cyclone Nargis

Abstract According to national household survey data for Myanmar, spanning the five-year interval 2005–2010, average real household consumption expenditures remained stagnant, but measured poverty incidence and inequality both declined significantly. The distribution of the economic pie shifted in favor of the poor while the overall size of the pie barely changed. This paper examines the possibility that the hitherto unexplained reduction in measured inequality was caused, at least partly, by a natural disaster, Tropical Cyclone Nargis, which devastated parts of Myanmar in May 2008. This hypothesis is supported by a recent historical study which argues that, globally, large reductions in inequality normally occur only through either man-made or natural disasters. The paper develops a method, based on regression analysis of household level data, for isolating the impact of an exogenous natural event like a cyclone. The estimated regression model is used to simulate a counterfactual distribution of expenditures in which, hypothetically, the cyclone did not occur. The estimated impact of the cyclone is the difference between the observed outcome, in which the cyclone happened, and this simulated, counterfactual outcome in which it did not. The findings indicate that the cyclone reduced inequality between regions of Myanmar, because the negatively affected regions were on average better-off than the unaffected regions, both before and after the cyclone. Within the affected regions the negative impact of the cyclone was largest in absolute terms among richer households, but as a proportion of household expenditures, these negative effects were larger among the poorer households. The cyclone therefore increased economic inequality within the affected regions. Overall measured inequality declined because the between-region reduction exceeded the within-region increase.

THE STATE AS A COMPETITOR

The most commonly asked question is whether states are competing with one another. It is correct to think that nations compete with each other just as the firms do. Paul Krugman points out that the idea of state competition is a dangerous obsession. However, the generally accepted viewpoint between policymakers and the academic world is very different. The transformation of the nation-state into a corporate market-state lies at the heart of political globalization. Inclusion in economic competition is another manifestation of practicing the so-called. "Soft power" by the states. Books, government reports, daily newspapers, television programs, virtually all over the world, announce the language and imagination of the battle of competition between countries for a larger piece of the global economic pie.

Developing Tools to Streamline the Process of Contract Administration

Contract is the basic legal arrangement between the parties to spell out mechanism of discharge of obligations related to any transaction. In case of construction, parties entered into a contract whereby contractor offers to execute a job on certain terms and conditions. These terms and conditions after being negotiated form the basic structure of exchange of promises. It is this contract administration which guides the actions of the parties and decide the obligations and hence the liabilities. Construction industry being the second largest sector of the economic pie of our country needs to be given attention both ways: technically as well as legally. With the growing advancement in technology, projects of larger size can be undertaken for the progress in development of a country at a faster rate. But projects of large scale bring larger complications which result in non completion of the project within its stipulated time and cost. To simplify these complications in a project, there is a need of developing proper correspondences at the right point of time. This study deals with managing the hindrances causing disputes and deciding the liability of the concerned parties by developing proper correspondences, documentation and having proper record keeping. To gain information of the industry as to what are the major reasons of disputes and percentage of projects where litigation occurred, a questionnaire survey was prepared which was circulated among the industry which included Owners, Contractors and Consultants viz. parties to a contract. In addition, it is thought useful to study some cases of success and failures of projects, so that we can supplement our process of analyzing and finalizing our conclusions about contract administration. The questionnaire and case studies helped in evaluating the hindrances that occur in pre-construction, construction and post construction phases. An attempt shall be made to prepare guidelines as well as include a checklist of activities wherein correspondence is required to act as evidence which will help in administering the contract during the various stages of a project. An attempt has been made on emphasizing the need of proper documentation and record keeping. It is through discussion, questionnaires and case study that we can have adequate information material to conclude and devise some checklist for guidance of contract administration. It is also observed that though the correspondences are done by the parties, the contents of the correspondences are misleading and mis-conceptual, also leading for disputes and hence it is an intent to prepare templates of various letters for important events like extra item, change order, extension of time, levy of L.D, etc. In short, the paper aims at streamlining the process of contract administration with a view to help both the parties to understand their liabilities and consequences arising out of.

Small State Representative

I am honored to be here, in San Francisco, representing a small developing country.Right from the conception of my state, Small Developing Country X, following decolonization in the 1960s, we have engaged with this whole global project on the premise that there is an ever-increasing economic pie. We have acted on the assumption of the nation-state leading a process of expanding economic and social well-being of its citizens through international cooperation and solidarity. But as we all know, this assumption is under threat today. World economic expansion is under threat. The real wealth of the world, not just the economic wealth, may be shrinking. And, the well-being of our vulnerable populations is becoming further impaired.

Is Efficiency Biased?

Efficiency is a watchword in policy circles. If we choose policies that maximize people’s willingness to pay, we are told, we will grow the economic pie and thus benefit the rich and poor alike. Who would oppose efficiency when it is cast in this fashion? However, there are actually two starkly different types of efficient policies: those that systematically distribute equally to the rich and the poor and those that systematically distribute more to the rich. Our collective failure to grasp this distinction matters enormously for those with a wide range of political commitments. Many efficient policies distribute more to the rich without the rich having to pay for their bigger slice. Because these “rich-biased” policies are ubiquitous, efficient policymaking places a heavy thumb on the scale in favor of the rich. Especially at this time of heightened concern about inequality, getting efficiency right should matter to a wide swath of the policymaking spectrum, from committed redistributionists to libertarians. We should support efficient policies only when the poor are compensated for their smaller slices or when efficient policies systematically distribute equally to the rich and the poor as we grow the size of the economic pie. This Article points a way forward in ensuring that a foundational tenet of the law does not follow a “rich get richer” principle, with profound consequences for policymaking.