Growth and/or Inequality? Preparing for the Future Prof. Avi Weiss - - PowerPoint PPT Presentation

Growth and/or Inequality? Preparing for the Future

• Prof. Avi Weiss

President, Taub Center Professor of Economics, Bar-Ilan University

Taub Center

for Social Policy Studies in Israel

info@taubcenter.org.il taubcenter.org.il Tel: (02) 567-1818 November 14, 2019

Herbert M. Singer International Policy Conference

The Kuznets (Inverted-U) Curve (1955) Income per capita Inequality

• Move from a rural society

(agriculture based) to an urban society (cities) results in increased incomes for those who move, thereby leading initially to greater inequality

• Once a large portion becomes

urbanized, the continued flow continues to increase income, but also lowers inequality as more people earn “city” wages

• Other changes, such as use of

modern technologies, can yield the same type of dynamic

Growth and Inequality – A dynamic

• Socialist economy (A Kibbutz): all income is pooled and equally divided no inequality
• Open economy to free trade and allow capital accumulation
• Increased growth as incentives lead to increased effort and entrepreneurial activities
• Increase inequality as some succeed more and some less
• The less successful – those in (relative or absolute) poverty could face inequality in
• pportunities, and not just in income or wealth, and a distortion of incentives
• Poor access to imperfect credit markets
• Poor access to quality education
• Stress that affects productivity
• Welfare benefits distort labor market decision (education and participation)
• Lower income individuals have a greater incentive to engage in crime, etc.
• As the inequalities grow these distortions increase, which can lead to a decrease in growth

as the potential of the population is not realized

• Increased inequality in opportunities may lead to
• Decreased growth

The processes that link between family socioeconomic background and cognitive development and academic achievement

Source: Dana Vaknin, Yossi Shavit, and Isaac Sasson, Taub Center

Cognitive development and educational achievements Parenting styles Stress Sensory stimulation Qualtiy of education Socioeconomic background

Predicted score

• n the Meitzav

exam in math, grade 5

Source: Dana Vaknin, Yossi Shavit, and Isaac Sasson, Taub Center Data: CBS

Children birth to age 2 Children ages 3 to 5

Growth and Inequality in Israel

The real cumulative change in household income and consumption, 2012-2017

Note: the real change is calculated using a differential price index that utilizes each income quintile’s consumption basket. Source: Gilad Brand, Taub Center | Data: CBS, Household Expenditure Survey

Income quintile

The Gini index and GDP per capita in Israel

Index year: 1998=100

Source: Gilad Brand, Taub Center | Data: IMF, NII

0.32 0.33 0.34 0.35 0.36 0.37 0.38 0.39 0.40 20 40 60 80 100 120 140 160 GDP per capita Gini index (disposable income)

Gini index after taxes and transfer payments in Israel and selected countries, 1998-2017

Source: Benjamin Bental and Gilad Brand, Taub Center | Data: OECD.Stat

ISRAEL Germany Canada US UK France Finland 0.24 0.26 0.28 0.30 0.32 0.34 0.36 0.38 0.40 1998 2000 2002 2004 2006 2008 2010 2012 2014 2017

Return to academic studies, selected OECD countries, 2012-2015

Source: Gilad Brand, Taub Center | Data: OECD, PIAAC

5.0% 9.4%

• 20%

0% 20% 40% 60% 80% 100%

32.8% 33.3%

• 20%

0% 20% 40% 60% 80% 100%

Upper half of the skills distribution Lower half of the skills distribution

62.7% 55.3%

Thank you!!

info@taubcenter.org.il taubcenter.org.il Tel: (02) 567-1818 September 2019

• Prof. Avi Weiss

President, Taub Center Professor, Bar-Ilan University