When the Poor Spend Like the Rich: Indian Household Expenditures on Services

Deepankar Basu and Debarshi Das study the steep increase in spending on services (education, healthcare, transportation, entertainment, personal services, and rent) among Indian households. They find that the spending patterns of poor households increasingly resemble those of the rich, even as income differentials persist. For a poor country like India, with widespread under-nutrition, this is unusual. It suggests that poorer households are possibly constrained into spending more on services such as medical visits or school tuition, even when they have inadequate food, due to larger structural changes beyond their control.

>>Read "Service Sector Growth in India: A View from Households"

Development Objectives and Macroeconomic Policy

Developing countries can take lessons from the ambiguous responses of rich countries to the financial crisis, writes PERI Co-Director Gerald Epstein. A positive lesson: Central banks can play a larger role in meeting the challenges of development if, like the Federal Reserve, they ignore the advice to pursue inflation targeting with one instrument. Relying on a diverse set of instruments is best. The negative lesson: Government and fiscal authorities must do their share to develop their economies. We should rethink the advocacy of “central bank independence.”

> Read “Achieving Coherence Between Macroeconomic and Development Objectives

Political Economy of Reforms in Post-Conflict and Fragile States

Twenty percent of Africa’s population lives in “fragile states”—vulnerable and unstable countries which lag behind in development. Poverty, inequality, and weak institutions are outcomes of fragility; they also undermine economic development. Policy making poses a greater challenge in these countries than in other developing states.

In collaboration with the African Development Bank, PERI organized a workshop in Senegal for senior government officials from over 10 African countries. The workshop offered a political economy perspective to institutional reforms required to build peace, alleviate fragility, and accelerate economic development.

> Read more about the workshop 

> Watch a two-part interview with Léonce Ndikumana about PERI’s recent work on policy reform in fragile states:

Part I: What are the challenges, and how can they be addressed?

Part II: Signs of progress

PERI Announces New Program on Gender and Care Work

We are pleased to announce that Nancy Folbre will be formally joining PERI as the Director of the PERI Program on Gender and Care Work. Folbre, Professor Emerita of Economics at UMass Amherst, is a former recipient of a MacArthur Fellowship, and the author of many books, including The Field Guide to the U.S. Economy and The Invisible Heart: Economics and Family Values. She also contributed weekly to The New York Times’ Economix blog from 2009 - 2014. Her research interests are in feminist theory and political economy, as well as care labor and other non-market work. 

>>Read our interview with Nancy Folbre about her new PERI program

Quantifying Family Contributions to Economic Output

Conventional measures of Gross Domestic Product (GDP) do not capture a number of contributions to economic output and family living standards. These non-market activities and expenses are ignored on the grounds that they are elements of personal well-being. Nancy Folbre, Director of PERI’s Program on Gender and Care Work, writes that measuring replacement cost estimates of non-market work and income flows within families is necessary for a more accurate understanding of economic growth, government spending, and inequality in living standards. Folbre presents a schematic microeconomic model that takes non-market work and income into account.

>>> Read Accounting for Care: A Research and Survey Design Agenda

What Factors Led to Profits in India’s Manufacturing Sector?

Growth in capitalist economies is tied to profitability. Even though capitalism has not fully taken root in developing econonomies, the organized manufacturing sector in India is clearly a capitalist one. What has driven profitability in this sector in the last three decades? Deepankar Basu and Debarshi Das find that profits have increased modestly, at a rate of 1 percent per year. During this period, they point to a long-run trend of regressive income distribution as a driver of profitability, as well as medium and short run changes determined by technological factors. 

>> Read Profitability in India’s Organized Manufacturing Sector: The Role of Technology, Distribution and Demand