Guest Editorial: Macro-Micro Analytics: Background, Motivation, Advantages and Remaining Challenges

Abstract

Disappointment with simple development formulas, such as the Washington Consensus, which have seemingly failed to spur strong inclusive growth in Latin America and Africa; recent evidence that fast growing parts of the world, such as East Asia, are experiencing upward trends in inequality; polarized debates on globalization and poverty, heightened by the 2008 global food and energy prices spike and the 2009 global financial crisis, have all led economists to a renewed attention to the relationship between macro (growth) and micro (poverty and distribution) issues. On the policy making front, the aforementioned facts and discussions have also had an impact. Many recent government economic programs and policies are, with stronger emphasis than before, aiming at the dual objective of accelerating growth, on the one hand, and fighting poverty and unequal access to opportunities, on the other. These trends have increased demands for rigorous analysis of the effectiveness of poverty reduction strategies and for assessment of the poverty and distributive effects of macroeconomic pro-growth policies. The range of policy issues subject to these evaluations is broad and includes in particular: a) Public spending; how do shifts in its size and composition (for example less infrastructure and more health, education, social protection expenditures) affect growth poverty and welfare distribution? b) Tax policy; what is the incidence of the current tax system on growth and distribution? How well are income transfers and subsidies targeted towards the poor and what is their overall effect? c) Structural policy reforms; do trade liberalization, regulation policy, labour market reforms, financial and other structural reforms produce growth that benefits everybody in the same proportion or do they have a progressive or regressive effects? d) Effects on growth and distribution of other macroeconomic policies: monetary or exchange rate policy, handling of crises, etc.