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Fooled by the Cycle: Permanent versus Cyclical Improvements in Social Indicators

José Andrée Camarena, Luciana Galeano, Luis Morano, Jorge Puig (), Daniel Riera-Crichton (), Carlos Vegh (), Lucila Venturi and Guillermo Vuletin ()

No 26199, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies the time-series behavior of a set of widely-used social indicators and uncovers two important stylized facts. First, not all social indicators are created equal in terms of the importance of cyclical fluctuations. While some social indicators such as the unemployment rate and monetary poverty show large cyclical fluctuations, other social measures such as the Human Development Index are, by construction, dominated by long-run trends. Second, a large fraction of the cyclical fluctuations in social indicators can be explained by the cyclical changes in income (proxied by real GDP per capita). Since cyclical income volatility is much larger in the developing world, these two critical facts raise fundamental issues regarding how permanent are improvements in social indicators (like the ones observed in many developing countries during the last commodity super-cycle). Finally, and relying on a global sample of industrial and developing countries, we dig deeper into the importance of cyclical versus permanent components by extending the seminal contribution of Datt and Ravallion (1992). In particular, we show that more than 40 percent of the fall in monetary poverty observed in Latin America and the Caribbean during the so-called Golden Decade can be attributed to cyclical changes in income.

JEL-codes: E32 I32 O54 (search for similar items in EconPapers)
Date: 2019-08
New Economics Papers: this item is included in nep-lam, nep-ltv and nep-mac
Note: IFM
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