 "James Joseph Heckman")
In your lecture, you mentioned the underground economy. In the political discourse in India, corruption is taking centre stage. How do you view this?
Corruption creates a sense that it’s not a fair game. Through corruption, some people get a benefit over others and that creates inequality. Some people get very rich because of this, while others don’t. If you have a social system that is corrupted, it is not healthy for a democracy such as India.
What is your outlook on the Indian economy five years hence?
I have not done any macroeconomic projections for India, but I strongly believe if reforms continue and if corruption is done away with, the robust economic growth will continue. But if corruption continues and the degree of regulation is pretty high for the private sector, it will be very negative.
I strongly encourage all political parties to think about reforms and ensuring proper incentives work. If you give people capabilities and the person cannot use those, it is not worthwhile. I was talking to a group of people and looking at some of the books on India and it seems corruption in India is serious. Anything that reduces efficiency and promotes inequality is never good.
Two major political parties, the Bharatiya Janata Party (BJP) and the Congress, are debating on the assessment of employment numbers in India. While the former says it should be measured in absolute numbers, the latter insists on ratios. How do you assess this?
I don’t rely on ratios. Usually, by themselves, unemployment statistics are not very good. The point is you have to see if people are better off. In the US, the unemployment ratio goes down because people drop out of the workforce and that’s not a very good measure.
Do you mean one has to look at absolute numbers?
Well, you have to actually see the welfare and look at how many people are working in the economy, what their earnings are and what their relative benefits will be. I think of a bigger measure.
According to a survey by the National Sample Survey Office, the labour force participation among women declined by about seven percentage points to 22.5 per cent between 2004-05 and 2011-12 in India. During this period, average economic expansion was about eight per cent. Why?
For a lot of families, there are two earners — a man and a woman. I do not know Indian data in this case. One explanation
could be their (the woman’s) earnings could be playing a less important role, as the man’s income might have risen. Therefore, the woman can spend more time with children or in valuable household production at home. The declining participation could also mean a great boom because today, many women are working because of extreme poverty in the family. Maybe, they are working in less menial jobs and even going to school more. In the US and other countries, as a result of economic expansion, work rates decline. So, you have to be careful in assessing.
What should be the prime agenda for political parties in India, especially as it’s an election year?
I suggest both the parties (the Congress and the BJP) look at creating opportunities by giving the whole society a greater opportunity to succeed.
In India, official estimates have shown while poverty fell sharply between 2004-05 and 2011-12, inequality increased marginally. Do you find any contradiction in this?
This happened in China and Brazil, too. One has to be careful (in assessing this), as inequality is a relative measure. Suppose, at a point of time, population distribution is poor and it increases with time and the poorest person earns more than what he earned 20 years ago. What could happen is you have more inequality, as measured by the Gini coefficient, but people are relatively better off. That’s what happened in China. There is a difference between relative dispersion and absolute dispersion (poverty). In many cases, real incomes are worse than before. So, I would separate the two (poverty and inequality).
What steps do you suggest to bring people out of poverty?
We should probably think more of pre-distribution rather than re-distribution. I will want to supplement the former with the latter. In pre-distribution, before people enter the market, you give them skills so that they can compete more evenly in the market. Also, you might want to focus on very young people. Some of the policies are efficient and economically fair.
When one gives facilities to improve health care and pension to the elderly, this could, at times, not have much of an effect on the rest of the society. But if one makes millions of children more productive, it will benefit everybody; the children will earn more, support a better social security system and their parents, too. The burden on the health front will be less.
Do you think cash transfers may be one of the measures?
No, I will think about policies that create more capabilities and focus on the early years, particularly for the section that is neglected.
