Fooled by the Cycle : Permanent versus Cyclical Improvements in Social Indicators
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 soci...
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| Format: | Working Paper |
| Language: | English en_US |
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Washington, DC : World Bank
2022
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| Online Access: | http://documents.worldbank.org/curated/en/099501006302232080/IDU036f9c1f805bad049de0832f097bc16467c57 http://hdl.handle.net/10986/37649 |
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okr-10986-376492022-07-07T05:10:38Z Fooled by the Cycle : Permanent versus Cyclical Improvements in Social Indicators Camarena, José Andrée Galeano, Luciana Morano, Luis Puig, Jorge Riera-Crichton, Daniel Vegh, Carlos Venturi, Lucila Vuletin, Guillermo BUSINESS CYCLE CYCLICALITY HUMAN DEVELOPMENT POVERTY SOCIAL INDICATOR UNEMPLOYMENT 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, interestingly, yet not surprisingly, a large part of the cyclical fluctuations in social indicators can be explained by cyclical changes in income (proxied by real GDP per capita). For this reason, countries with large cyclical income volatility exhibit, in turn, large cyclical changes in some of these social indicators (particularly in those indicators that are more prone to cyclical fluctuations). Since cyclical income volatility is much larger in the developing world, these two critical stylized facts raise fundamental issues regarding the duration of improvements in social indicators (like the ones observed in many developing countries during the last commodity super-cycle). After a detailed conceptual and methodological discussion of these issues, and relying on a global sample of industrial and developing countries, this paper digs deeper into the importance of cyclical versus permanent components by extending the seminal contribution of Datt and Ravallion (1992). In particular, it shows 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. While in principle universal, these concerns are particularly relevant in the developing world where, compared to developed countries, output volatility is larger and driven, to a large extent, by external factors (such as commodity prices). 2022-07-06T18:09:20Z 2022-07-06T18:09:20Z 2022-06 Working Paper http://documents.worldbank.org/curated/en/099501006302232080/IDU036f9c1f805bad049de0832f097bc16467c57 http://hdl.handle.net/10986/37649 English en_US Policy Research Working Paper;10115 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank Washington, DC : World Bank Publications & Research Publications & Research :: Policy Research Working Paper World |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
BUSINESS CYCLE CYCLICALITY HUMAN DEVELOPMENT POVERTY SOCIAL INDICATOR UNEMPLOYMENT |
| spellingShingle |
BUSINESS CYCLE CYCLICALITY HUMAN DEVELOPMENT POVERTY SOCIAL INDICATOR UNEMPLOYMENT Camarena, José Andrée Galeano, Luciana Morano, Luis Puig, Jorge Riera-Crichton, Daniel Vegh, Carlos Venturi, Lucila Vuletin, Guillermo Fooled by the Cycle : Permanent versus Cyclical Improvements in Social Indicators |
| geographic_facet |
World |
| relation |
Policy Research Working Paper;10115 |
| description |
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, interestingly, yet not
surprisingly, a large part of the cyclical fluctuations in
social indicators can be explained by cyclical changes in
income (proxied by real GDP per capita). For this reason,
countries with large cyclical income volatility exhibit, in
turn, large cyclical changes in some of these social
indicators (particularly in those indicators that are more
prone to cyclical fluctuations). Since cyclical income
volatility is much larger in the developing world, these two
critical stylized facts raise fundamental issues regarding
the duration of improvements in social indicators (like the
ones observed in many developing countries during the last
commodity super-cycle). After a detailed conceptual and
methodological discussion of these issues, and relying on a
global sample of industrial and developing countries, this
paper digs deeper into the importance of cyclical versus
permanent components by extending the seminal contribution
of Datt and Ravallion (1992). In particular, it shows 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. While in principle universal, these
concerns are particularly relevant in the developing world
where, compared to developed countries, output volatility is
larger and driven, to a large extent, by external factors
(such as commodity prices). |
| format |
Working Paper |
| author |
Camarena, José Andrée Galeano, Luciana Morano, Luis Puig, Jorge Riera-Crichton, Daniel Vegh, Carlos Venturi, Lucila Vuletin, Guillermo |
| author_facet |
Camarena, José Andrée Galeano, Luciana Morano, Luis Puig, Jorge Riera-Crichton, Daniel Vegh, Carlos Venturi, Lucila Vuletin, Guillermo |
| author_sort |
Camarena, José Andrée |
| title |
Fooled by the Cycle : Permanent versus Cyclical Improvements in Social Indicators |
| title_short |
Fooled by the Cycle : Permanent versus Cyclical Improvements in Social Indicators |
| title_full |
Fooled by the Cycle : Permanent versus Cyclical Improvements in Social Indicators |
| title_fullStr |
Fooled by the Cycle : Permanent versus Cyclical Improvements in Social Indicators |
| title_full_unstemmed |
Fooled by the Cycle : Permanent versus Cyclical Improvements in Social Indicators |
| title_sort |
fooled by the cycle : permanent versus cyclical improvements in social indicators |
| publisher |
Washington, DC : World Bank |
| publishDate |
2022 |
| url |
http://documents.worldbank.org/curated/en/099501006302232080/IDU036f9c1f805bad049de0832f097bc16467c57 http://hdl.handle.net/10986/37649 |
| _version_ |
1764487605163917312 |