17 April 2017   Leave a comment

The International Monetary Fund is about to release its World Economic Outlook, April 2017 and some chapters to the study are already available.  Chapter 3, “Understanding the Downward Trend in Labor Income Shares,” has been published and its findings confirm what other studies have found.  One of the more telling statistics confirms the growing discrepancy between low- and high-skilled wages:

“The decline in the global labor share has been borne by low- and middle-skilled labor. During 1995–2009 their combined labor income share was reduced by more than 7 percentage points, while the global high-skilled labor share increased by more than 5 percentage points.”

The study also indicates that it is hard to assess the income inequality trends across countries:

“A less well-known fact about the fall in labor shares at the global level is that it reflects declining shares in both advanced and, to a lesser extent, emerging market and developing economies. Indeed, the labor share of the chosen period also serves to maximize data coverage of emerging market and developing economies.  This finding corroborates that of Karabarbounis and Neiman (2014). Relative to that paper, the chapter’s data cover a larger number of countries and extend their time period by up to four years. Importantly, the data used in this chapter include significant revisions to the official labor share data for systemically large countries such as Brazil, China, Germany, and the United Kingdom. income has declined in four of the world’s five largest economies, led by the steepest decline in China, while the labor share of income in the United Kingdom has trended up.”

The study is quite important and should become part of the mainstream conversation about the global economy.

 

US Vice-President Pence is in South Korea and he made some interesting comments about the North Korean nuclear program while there.  Pence said that the US had run out of “strategic patience” and went on:

“Just in the past two weeks, the world witnessed the strength and resolve of our new president in actions taken in Syria and Afghanistan.

“North Korea would do well not to test his resolve or the strength of the armed forces of the United States in this region.”

The truth of the matter is that the US can do very little about the situation in North Korea.  A pre-emptive strike would likely not be wholly successful in the short-run and would undoubtedly trigger off a conventional war which would kill thousands.  According to The Hill, a senior North Korean official stated that the US had created “a dangerous situation in which a thermonuclear war may break out at any minute.”  Meanwhile, there are reports that the US is sending two more aircraft carrier groups to join the USS Carl Vinson off the coast of North Korea:  the USS Ronald Reagan and the USS Nimitz.

The Pew Research Center has released a very detailed analysis of American views of the US government, particularly on President Trump’s ability to lead the country.  The results are consistent with common views: Republicans support Mr. Trump strongly, while Democrats are very skeptical.  But on the some of the questions, there are clear doubts about Mr. Trump.  Virtually, no one thinks that Mr. Trump is “too cautious”. Another insight is that many Americans do not believe that they can trust what Mr. Trump says:

“When asked to compare Trump with previous presidents, 51% say they trust what Trump says less than they trusted what previous presidents said while in office, compared with 30% who say they trust him more and 16% who say they trust what he says about the same as what previous presidents said.”

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Posted April 17, 2017 by vferraro1971 in World Politics

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