How do neighborhood characteristics and social cleavages within cities influence economic development? This study by PERI economist Vamsi Vakulabharanam and Sripad Motiram addresses these questions for the Indian cities of Hyderabad and Mumbai. The study conducts an inequality decomposition exercise to show that a substantial portion of intra-city income inequality is explained by social cleavages such as classes and social groups (caste and religion). The results show both that urban inequalities are stark, and that spatial co-existence of classes and social groups (a phenomenon that the authors term as “Grayness”) is pronounced, with Grayness exerting a strong positive impact on development.

Shadow banking in China plays an important role in China’s overall financial system, but assessments of its impact vary widely. In this paper, Sarah Hsu describes how shadow banking is viewed by Chinese government officials and industry experts as overly risky and potentially undermining the formal financial system. But shadow banks are filling a gap in the provision of finance to particular sectors and smaller firms. Hsu analyzes the impact of government regulation on the shadow banking and non-shadow banking financial sector (i.e., the stock market) and proposes ways to strengthen the regulations of shadow banks to improve access to credit.

In “The American Corporation in Crisis—Let’s Rethink It,” PERI researcher Lenore Palladino argues that, for decades, the concept of shareholder primacy in corporate organization has abandoned the idea that corporations’ employees should benefit when the corporations are succeeding. Over recent decades, the commitment to shareholder primacy has contributed to the persistent rise of inequality between workers versus their employers—i.e., top management and share owners. Palladino proposes approaches to create more egalitarian corporate structures. Thirteen leading analysts comment on Palladino’s proposals in a special Boston Review Forum, and Palladino responds to the commentators.