Will income inequality cause a middle-income trap in Asia? Bruegel Working Paper 2013/06, 10 October 2013

The Asian economy is expected to realise favourable growth during the first half of this century, but there is no guarantee. There is a discussion about a ‘middle-income trap’, which refers to a country that has realised rapid growth to become a middle-income country but is unable to grow further. A middle-income trap could occur not only if there is a delay in shifting the economy toward a productivity-driven structure, but also if there is a worsening of income distribution.We consider this in line with the theories of development economics and through a quantitative analysis. The relationship between income inequality and the trap can be explained by the Kuznets hypothesis and the basic-needs approach. Our quantitative analysis supports the Kuznets hypothesis, and indicates that,although a low-income country can accelerate its economic growth with the worsening of income distribution as an engine, a middle income country would experience a decreasing growth rate if it fails to narrow the income gap between the top and bottom income groups. The results also show that the basic-needs approach is also applicable in practice, and imply that the improvement of access to secondary education is important. A sensitivity analysis for three Asian upper-middle-income countries(China, Malaysia and Thailand) also shows that the situation related to a middle-income trap is worse than average in China and Malaysia. These two countries, according to the result of the sensitivity analysis, should urgently improve access to secondary education and should implement income redistribution measures to develop high-tech industries, before their demographic dividends expire. Income redistribution includes the narrowing of rural urban income disparities, benefits to low-income individuals, direct income transfers, vouchers or free provision of education and health-care, and so on, but none of these are simple to implement.

A post-mortem of the Vilnius Summit: Not yet a ‘Thessaloniki moment’ for the Eastern Partnership. CEPS Commentary, 3 December 2013

In assessing the third Eastern Partnership (EaP) Summit at Vilnius on November 28-29th, this CEPS Commentary concludes that the event fell far short of its initial ambition to define the geopolitical finalité of EU-EaP relations by projecting a path towards future accession to the EU for Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine.

Ukraine and Security Disorder in Europe – A Defining Moment for the OSCE? CEPS Commentary, 24 April 2014

The Organization for Security and Cooperation in Europe (OSCE) is the first and currently the only international body to have a monitoring mission deployed in Ukraine. This is as it should be, argues Erwan Fouéré. Today, with EU members making up half the membership of the OSCE, the EU needs to show greater responsibility and far-sightedness in its dealings with the OSCE. In the run-up to the 40th anniversary of the Helsinki Final Act, and faced with its most serious security crisis since the fall of the Berlin Wall, the EU should take the lead once again in fostering collective responsibility on the part of all Participating States to ensure a meaningful and effective role for the OSCE.

Ukraine and Security Disorder in Europe - A Defining Moment for the OSCE? CEPS Commentary, 24 April 2014

The Organization for Security and Cooperation in Europe (OSCE) is the first and currently the only international body to have a monitoring mission deployed in Ukraine. This is as it should be, argues Erwan Fouéré. Today, with EU members making up half the membership of the OSCE, the EU needs to show greater responsibility and far-sightedness in its dealings with the OSCE. In the run-up to the 40th anniversary of the Helsinki Final Act, and faced with its most serious security crisis since the fall of the Berlin Wall, the EU should take the lead once again in fostering collective responsibility on the part of all Participating States to ensure a meaningful and effective role for the OSCE.

The role of cultural attributes in inequality. ACES Working Paper No. 1, 2008

This paper used cross country data in order to identify the variables that determine the inequality and poverty within countries. The main result is that culture differences have a significant role in the explanation of inequality and poverty differences between countries. Other interesting results are that globalization above a certain level contributes to inequality and poverty, and that inequality and poverty have an inverse U relation in relation to literacy.

Inequality in the Southern Mediterranean: A survey of selected countries. MEDPRO Technical Report No. 23/December 2012

This paper addresses the issues of current levels of inequality: their trends, determinants and future scenarios, demonstrating that welfare levels are measured by per capita consumption. Location, educational attainment and employment status have been identified as the key factors affecting levels of welfare and its distribution. A benefit incidence analysis was performed to investigate benefits of different deciles of per capita expenditure from education and health services. The inequality patterns in countries under investigation present significant variations; countries such as Turkey, Morocco and Tunisia show relatively high inequality while others, such as Egypt or Syria, show moderate to low inequality. Inequality in human development was addressed using the inequality-adjusted human development index (IHDI), introduced by Global HDR 2010. The average loss in the HDI due to inequality in all Arab countries under investigation is about 20%. Two reference scenarios (optimistic and pessimistic) were used to project future paths up to 2020 and 2030. The impact of positive growth is increasing inequality and a shrinking middle class. Results show that the rich benefit most from this growth path. The opposite trend is observed for the pessimistic scenario.

Turkey’s 7 June parliamentary elections – Part I. A pivotal moment for Turkey’s future. EPC Commentary, 3 June 2015

On 7 June, Turks will head to the polls to elect a new parliament. This election is a pivotal moment for Turkey’s future, with two battles being played out. While the first is about securing a majority in parliament, the second is related to President Recep Tayyip Erdoğan and his goal of creating a presidential system of governance. Furthermore, the future of the Kurdish Peace Process and the stability in the southeast of the country will almost certainly hinge on the outcome. Hence, this election is a battle for Turkey's future.

The Effects of Ultra-Loose Monetary Policies on Inequality. Bruegel Policy Contribution Issue 2015/09, June 2015

Highlights • Low interest rates, asset purchases and other accommodative monetary policy measures tend to increase asset prices and thereby benefit the wealthier segments of society, at least in the short-term, given that asset holdings are mainly concentrated among richest households. • Such policies also support employment, economic activity, incomes and inflation, which can benefit the poor and middle-class, which have incomes more dependent on employment and which tend to spend a large share of their income on debt service. • Monetary policy should focus on its mandate, while fiscal and social policies should address widening inequalities by revising the national social redistribution systems for improved efficiency, intergenerational equity and fair burden sharing between the wealthy and poor.

The nuclear deal with Iran: Le moment suprême? CEPS Commentary, 16 July 2015

More than two years in the making, the agreement concluded by China, the EU, France, Germany, Russia, the UK and the US with Iran to prevent the ‘weaponisation’ of the latter’s nuclear programme is a big deal. But, cautions Steven Blockmans in this CEPS Commentary, it is not the silver bullet to the normalisation of relations. Implementation will be a tortuous process, fraught with suspicion and friction. Although Europe has been called upon to seize the moment and to shift to a relationship with Iran based on engagement, not containment, the EU and its member states would be better advised not to move beyond their nuclear focus too quickly, but rather to show a sense of duty and loyal cooperation with their international partners by supporting the effective execution of the accord.

Wage inequality in Germany – What role does global trade play? Policy Brief #2015/03

Wage inequality in Germany has increased significantly since the mid-1990s. The intensification of international trade relations is a frequently cited cause for this issue. However, an empirical study revealed that global trade can only directly explain around 15 percent of the increase in wage inequality in Germany. Primarily, the growing heterogeneity among companies in Germany plays a greater role – especially within industries. The decline in collective bargaining is the primary company-specific driver of wage inequality. Nevertheless, protectionist measures would not be effective for achieving greater wage equality.