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Economic Mobility Growth and equality of opportunities:
The Asia Foundation’s contribution
Véronique Salze-Lozac’h Senior Director of Economic Development
Colombo - August 2014
WHAT IS ECONOMIC MOBILITY? WHY IS IT IMPORTANT? HOW IS IT MEASURED?
What is Economic Mobility?
The ability of individuals, families, or groups to move up or down
the income distribution (moving between income quintiles)
The American Dream….
Why it is important?
Dynamic indicator allowing for a qualitative/quantitative assessment of growth
Growth – economic opportunities Poverty – Inequality Social stability, health, crime,
Different Levels of Economic Mobility
Individual and Family Level • Better economic opportunities higher income for
individuals and families
Country-Level • Economic dynamism higher GDP growth
WWW.BIT.LY/1KDLJLY GAPMINDER GRAPH: Growth of Asian countries
Economic Mobility &
GNI Per Capita
Asia countries ranking (World Bank)
Asia
Asia
Asia
High-Income Economies - Hong Kong SAR, China - Japan - South Korea - Macao SAR, China - Singapore
Middle- Income Economies - Bhutan - China* -Indonesia -India - Lao PDR - Malaysia* - Maldives* - Mongolia - Pakistan -Philippines - Sri-Lanka - Thailand* - Timor-Leste - Vietnam
Low-Income Countries -Afghanistan - Bangladesh - Cambodia - North Korea - Myanmar - Nepal
*Upper-Middle Income Economies
Different Types of Economic Mobility
ABSOLUTE RELATIVE
INTRA-GENERATIONAL
INTER-GENERATIONAL
Someone’s income increasing from
$20,000 to $40,000
Someone’s income increasing from
$20,000 to $40,000, whilst others have
increased to $60,000
Someone earning $40,000, whilst their
parents were earning $20,000 at the same point in their career
Someone’s income places them at the
80th percentile of income distribution,
where as their parents were at the 70th
percentile
Measuring Economic Mobility
Income • Intergenerational
Earnings Elasticity • Purchasing Power
> Multi-Dimensional > Comprises Earnings, Income, and Wealth > Non-Constant – varies amongst segments of the population
Poverty • Extreme poverty • Urban vs Rural Poverty
Inequality • % Income Share • Pareto-Lorenz • Gini Index
Economic mobility and inequality: Not a straightforward relationship
• Lack of economic mobility can lead to increased inequality… but not necessarily
• Countries with high economic mobility can also have high inequality
Intergenerational earnings elasticity
Correlation between GINI and Intergenerational Earnings Elasticity
Inte
rgen
erat
ionl
a Ea
rnin
gs E
last
icity
PATHWAYS FOR IMPROVING ECONOMIC MOBILITY
Equality of Opportunity
Key Elements of Economic Mobility
3. Social Safety Nets – Health,
Housing, Pension, Employment
2. Free & Supportive
Business Environment &
Trade
4. Budgetary & Fiscal Policies
1.Education & Training
Economic mobility
Social capital
Human capital
Financial capital
Supporting pillars
Singapore as the archetype of positive economic mobility?
- Human capital development (education/training - migration)
- Ease of doing business - Trade and globalization - Open and transparent
processes - Social Policies (e.g. public
housing, pension, healthcare)
Policies that stifle economic mobility: Non redistributive tax system?
• Family • Skills and education of
parents • Networks – school,
college, work, community
Examples of The Asia Foundation actions :
• Access to information and knowledge
• Networking (SAWES) • Public-Private
Dialogues
• Savings • Wealth – home or
land ownership, inheritance
• Credit
Examples of The Asia Foundation actions : • Access to credit (BG, CH) • Land reform (PH)
• Education • Social safety nets • Access to
employment
Examples of The Asia Foundation actions :
• Political strategies • Budgetary policies • Decentralization • Training and
Mentoring
GENDER DIMENSION • access to education • employment rates • entrepreneurship,
etc.
MIGRATION Geographic mobility as a key factor for economic mobility
Examples of The Asia Foundation actions :
• Scholarships,
education • Women Economic
Empowerment • Migration
Supporting Increased Economic Opportunities
• Economic Governance Index • Public-Private Dialogues • Political Economy for Reforms
Country-Level Economic Mobility
• Human Capital (Quality Education)
• Innovation and IPR • Investments (Infrastructure…) • Strong Governance • Global and Regional Economic
Cooperation
Questions
Does economic mobility increase
inequality?
Is increased inequality the symptom or the cause of economic mobility?
