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How can a society’s well-being be measured to include not only average incomes but also their distribution? How can the effects of policies be assessed by considering both equity and efficiency? This primer outlines the seminal contributions of influential economists of the past, including Arthur Okun, who developed a simple method to elicit people’s preferences regarding redistribution, and Anthony Atkinson, who showed how equity and efficiency can be measured simultaneously and summarized in a single, intuitive index expressed in monetary units (such as dollars). These methods are applied to recent data to gauge how countries fare when both mean incomes and their distribution are considered together, and to a hypothetical tax-and-transfer scheme assessed through a general equilibrium model for household-level data.

Foreign Exchange --- Macroeconomics --- Externalities --- Personal Income, Wealth, and Their Distributions --- Aggregate Factor Income Distribution --- Macroeconomics: Consumption --- Saving --- Wealth --- Currency --- Foreign exchange --- Personal income --- Income inequality --- Income distribution --- Purchasing power parity --- Consumption --- National accounts --- Income --- Economics --- United States

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This paper investigates the determinants of sustained accelerations in goods and services exports. Strong predictors of export takeoffs include domestic and structural indicators such as lower macroeconomic uncertainty, improved quality of institutions, a depreciated exchange rate, and agricultural reforms. Lower tariffs, participation in global value chains and diversification also contribute to initiating export accelerations. The paper also finds heterogeneity, with somewhat different triggers for Latin America and the Caribbean, as well as for goods and services. Finally, despite the lack of a robust effect on output, export surges tend to be associated with lower post-acceleration unemployment and income inequality.

Latin America --- Economic conditions. --- Exports and Imports --- Macroeconomics --- Trade Policy --- International Trade Organizations --- Empirical Studies of Trade --- Economic Growth of Open Economies --- Economic Development, Innovation, Technological Change, and Growth --- Economywide Country Studies: Latin America --- Caribbean --- Trade: General --- Aggregate Factor Income Distribution --- International economics --- Exports --- Service exports --- Export performance --- Income inequality --- Income distribution --- International trade --- National accounts --- Brazil

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In this paper, we use a DSGE model to study the passive and time-varying implementation of macroprudential policy when policymakers have noisy and lagged data, as commonly observed in lowincome and developing countries (LIDCs). The model features an economy with two agents; households and entrepreneurs. Entrepreneurs are the borrowers in this economy and need capital as collateral to obtain loans. The macroprudential regulator uses the collateral requirement as the policy instrument. In this set-up, we compare policy performances of permanently increasing the collateral requirement (passive policy) versus a time-varying (active) policy which responds to credit developments. Results show that with perfect and timely information, an active approach is welfare superior, since it is more effective in providing financial stability with no long-run output cost. If the policymaker is not able to observe the economic conditions perfectly or observe with a lag, a cautious (less aggressive) policy or even a passive approach may be preferred. However, the latter comes at the expense of increasing inequality and a long-run output cost. The results therefore point to the need for a more careful consideration toward the passive policy, which is usually advocated for LIDCs.

Credit. --- Borrowing --- Finance --- Money --- Loans --- Finance: General --- Macroeconomics --- Industries: Financial Services --- Financial Markets and the Macroeconomy --- Business Fluctuations --- Cycles --- General Financial Markets: Government Policy and Regulation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Aggregate Factor Income Distribution --- Macroeconomics: Consumption --- Saving --- Wealth --- Financial sector stability --- Macroprudential policy --- Collateral --- Income inequality --- Consumption --- Financial services industry --- Economic policy --- Income distribution --- Economics

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We estimate the effects on growth of nine fiscal reform episodes in seven high-income countries using the Synthetic Control Method. These episodes are selected using an indicator-based approach applied to the evaluation of growth-friendly fiscal reforms during 1975-2010. We find that in reform countries the annual growth rate of real GDP was on average about 1 percentage point above their synthetic units 10 years after each respective reform. Moreover, countries which were initially less developed seemed to experience a larger growth impact after their reforms. Results are broadly robust to controlling for structural reforms on business regulation, financial market, labor market, and legal and product markets, which may also affect growth. Our findings also suggest that inequality is not affected by the growth-friendly fiscal reforms analyzed in this paper.

Macroeconomics --- Public Finance --- Fiscal Policy --- Economic Growth and Aggregate Productivity: General --- Comparative Studies of Countries --- Institutions and the Macroeconomy --- Aggregate Factor Income Distribution --- Personal Income, Wealth, and Their Distributions --- Fiscal policy --- Structural reforms --- Personal income --- Income inequality --- Income distribution --- Macrostructural analysis --- National accounts --- Income --- Chile

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This paper assesses the macroeconomic and distributional impact of personal income tax (PIT) reforms in the U.S. drawing on a multi-sector heterogenous agents model in which consumers have non-homothetic preferences and sectors differ in terms of their relative labor and skill intensity. The model is calibrated to key characteristics of the US economy. We find that (i) PIT cuts stimulate growth but the supply side effects are never large enough to offset the revenue loss from lower marginal tax rates; (ii) PIT cuts do “trickle-down” the income distribution: tax cuts stimulate demand for non-tradable services which raise the wages and employment prospects of low-skilled workers even if the tax cut is not directly incident on them; (iii) A revenue neutral tax plan that reduces PIT for middle-income groups, raises the consumption tax, and expands the Earned Income Tax Credit can have modestly positive effects on growth while reducing income polarization; (iv) The growth effects from lower income taxes are concentrated in non-tradable service sectors although the increased demand for tradable goods generate positive spillovers to other countries; (v) Tax cuts targeted to higher income groups have a stronger growth impact than tax cuts for middle income households but significantly worsen income polarization, even after taking into account trickle-down effects and an expansion of the Earned Income Tax Credit.

Macroeconomics --- Taxation --- Personal Finance -Taxation --- Fiscal Policy --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Aggregate Factor Income Distribution --- Macroeconomics: Consumption --- Saving --- Wealth --- Labor Economics: General --- Business Taxes and Subsidies --- Public finance & taxation --- Labour --- income economics --- Income --- Consumption --- Labor --- Income and capital gains taxes --- Consumption taxes --- National accounts --- Taxes --- Personal income tax --- Economics --- Labor economics --- Income tax --- Spendings tax --- United States