Topics on Stratification, Inequality and Poverty
Paper Session
Sunday, Jan. 9, 2022 12:15 PM - 2:15 PM (EST)
- Chair: Merve Burnazoglu, Utrecht University
Financialization and the Just Transition to the Green Economy
Abstract
Climate change and inequality are the top challenges of the twenty-first century. A green transition such as the Green New Deal has been considered as a viable solution to both challenges, due to its potential for reducing greenhouse gas emissions, curbing global warming, stimulating economic growth, creating jobs, and alleviating poverty. To achieve the green transition, large sums of finance are needed. A key question is whether the current financial architecture is compatible with the visions of a transition that is both green and just. This paper provides a political economy analysis of the question and examines three incompatibilities between financialization and the green transition. First, although renewable energy, electronic vehicle and other green sectors have seen significant growth, industrial leaders and start-ups are involved in large-scale rent-seeking financial activities such as stock buybacks. Such activities take away crucial financial resources that could have been used to support innovation and job security. Second, recent capital-raising innovations such as special-purpose acquisition companies allow the financial service industry to extract more value from the green sector. Third, the financialized business model of companies in the green sectors contributes to income and wealth inequality in the economy by rewarding senior corporate executives, institutional investors, and activist shareholders.Economic Democracy and Social Stratification
Abstract
The Covid-19 pandemic has revealed the deep underlying inequalities in many societies, as the poor, the young, ethnic minorities, and the elderly tend to bear the of the direct impact of the virus and the mitigating policies in response to the pandemic. Wealth was and is the best defence against Covid-19.Stratification economics provides insight into the persistence of income and wealth inequalities as a consequence of underlying institutional arrangements and structural processes that privilege a social elite. To some extent, this contrasts with Piketty’s (2014) narrower emphasis on the differential growth trajectories in income derived from capital and wider national income. Piketty recommends that inequalities may be addressed through taxation of wealth. By contrast, stratification economics speaks of the need of profound and significant institutional reform as necessary in addressing entrenched inequalities. The case made by stratification economics may have become more pressing as societies seek to recover from Covid-19. In this paper, we argue that the literatures on social stratification and economic democracy have unexplored complementarities. Economic democracy, broadly conceived, we believe has the potential to provide a basis for the institutional reform consistent with the promotion of greater equality. We present a broad conceptualisation of economic democracy. We develop an economic democracy index (EDI), which attempts to capture this broader conception. We present evidence indicating that the extent of economic democracy is positively related to greater levels of income equality. Those economies with institutions that foster economic democracy tend to demonstrate a consistently lower incidence of comparative income inequality. Accordingly, we believe that there is a case to be made that articulates greater economic democracy as part of societies’ post-pandemic response.The Efficacy of Microfinance in Alleviating Poverty with Controlled Variables; An Agent Based Model
Abstract
Despite reducing poverty 26.1% in 1990 to 4.1% in 2016, the inequality had remained unchanged over the past decade (IPS, 2018). While gender and education inequalities seem to be minimum regionally, the wealth inequality had spread wide across regionally given the backdrop of a universal health and education system in the country. As a response to one of the contributory factors; lack of accessibility to finance, Micro Finance Institutes (MFIs) bloomed supplying funding needs for the poor. The popularity of microfinance arose because of the need of collateral in order to get the funding was waived off but came with a higher price; the higher interest rates ranging from 40%-220% (Kadirgamar, 2019). Despite the accessibility of these financial instruments, they became a social issue for the poor given their exploitative nature resulting an increase in suicide rates and external migration given the heavy debt burden. Even though there are sufficient literature on the nexus between poverty alleviation and microfinance, Agent Based Modelling (ABM) can be a useful tool in understanding the dynamics of microfinance. The significance of the use of ABM appear with the existing literature failing to understand efficacy of microfinance instruments under prevailing conditions. By utilizing ABM, it enables to recreate and measure the accumulation of wealth through controlling variables such as the purpose of the loan; consumption or investment, the economic environment; economic performance, population and networks and finally through the interest rates under certain assumptions such as universal literacy rates and skills. ABM would help to compare maximization of wealth under certain controlled variables.Prioritarianism, Inequality and Fractional Stochastic Dominance
Abstract
Prioritarian decision makers may impose some restrictions on the social welfare variations when they perform transfers of utility. A redistributive policy is desirable if the prioritarian decision maker judges that welfare gains issued from a utility transfer is higher than a given proportion of welfare gain that would occur if the transfer took place between agents with higher utility levels. This redistributive policy is compatible with fractional stochastic dominance either to reduce inequality or to improve social welfare. We show that fractional dominance can be applied to optimal taxation. An illustration is provided on the French budget families composed of 42,900 individuals.JEL Classifications
- B5 - Current Heterodox Approaches
- D6 - Welfare Economics