Verme, Paolo

Person:
Verme, Paolo

Global Practice on Poverty and Inequality

Fields of Specialization

Welfare, Poverty, Inequality, Labor markets, Refugees, Middle East, North Africa, former Soviet Union

ORCID

0000-0002-8754-1138

External Links

RePEc
Research Gate

Departments

Global Practice on Poverty and Inequality

Last updated January 31, 2023

Biography

Paolo Verme is Lead Economist at the World Bank. A Ph.D. graduate of the London School of Economics, he was Visiting Professor at Bocconi University in Milan (2004-2009) and at the University of Turin (2003-2010) before joining the World Bank in 2010. For almost two decades, he served as senior advisor and project manager for multilateral organizations, private companies and governments in the areas of labor market, welfare and social protection policies. His research is widely published in international journals, books and reports. His most recent book is on the welfare of Syrian refugees, a joint study between the World Bank and the UNHCR.

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Publication Search Results

Now showing 1 - 10 of 28

Top Incomes and the Measurement of Inequality in Egypt

(World Bank, Washington, D.C., 2013-08) Hlasny, Vladimir ; Verme, Paolo

By all accounts, income inequality in Egypt is low and had been declining during the decade that preceded the 2011 revolution. As the Egyptian revolution was partly motivated by claims of social injustice and inequalities, this seems at odds with a low level of income inequality. Moreover, while income inequality shows a decline between 2000 and 2009, the World Values Surveys indicate that the aversion to inequality has significantly increased during the same period and for all social groups. This paper utilizes a range of recently developed statistical techniques to assess the true value of income inequality in the presence of a range of possible measurement issues related to top incomes, including item and unit non-response, outliers and extreme observations, and atypical top income distributions. The analysis finds that correcting for unit non-response significantly increases the estimate of inequality by just over 1 percentage point, that the Egyptian distribution of top incomes follows rather closely the Pareto distribution, and that the inverted Pareto coefficient is located around median values when compared with 418 household surveys worldwide. Hence, income inequality in Egypt is confirmed to be low while the distribution of top incomes is not atypical compared with what Pareto had predicted and compared with other countries in the world. This would suggest that the increased frustration with income inequality voiced by Egyptians and measured by the World Values Surveys is driven by factors other than income inequality.
The Relative Income and Relative Deprivation Hypotheses : A Review of the Empirical Literature

(World Bank, Washington, DC, 2013-09) Verme, Paolo

The paper provides a review of the empirical literature in economics that has attempted to test the relative income hypothesis as put forward by Duesemberry (1949) and the relative deprivation hypothesis as formalized by Runciman (1966). It is argued that these two hypotheses and the empirical models used to test them are essentially similar and make use of the same relative income concept. The review covers the main intellectual contributions that led to the formulation and tests of these hypotheses, the main formulations of the utility and econometric equations used in empirical studies, the main econometric issues that complicate tests of the hypotheses, and the empirical results found in the literature. The majority of studies uses absolute and relative income together as explanatory factors in utility models and finds absolute income to have a positive and significant effect on utility (happiness). The majority of studies also finds relative income to be a significant factor in explaining utility but the sign of this relation varies across studies. The source of this variation is complex to detect given that few results are directly comparable across studies because of differences in model specifications.
The Income Lever and the Allocation of Aid

(World Bank, Washington, D.C., 2013-02) Ceriani, Lidia ; Verme, Paolo

The paper develops a concept and a measure of the monetary capacity of a country to reduce its own poverty and shows how these tools can be used to guide budget allocations or the allocation of aid. The authors call this concept the income lever. Making use of tax and distributive theory, the paper shows how different redistributive criteria correspond to the different normative criteria of the income lever. It then constructs various income lever indexes based on these criteria and uses such indexes to rank countries according to their own capacity to reduce poverty. As shown in the empirical application, this methodology can provide an equitable tool to rank countries or regions when it comes to budget or aid allocations, whether it is the allocation of social funds within the European Union (North-North transfers) or the allocation of aid from rich to poor countries (North-South transfers). The findings indicate that the allocation of social funds in the European Union follows closely the rank that results from the income lever indexes proposed while the allocation of aid to Sub-Saharan African countries does not.
Individual Diversity and the Gini Decomposition

(World Bank, Washington, DC, 2014-01) Ceriani, Lidia ; Verme, Paolo

The paper defines the Gini index as the sum of individual contributions where individual contributions are interpreted as the degree of diversity of each individual from all other members of society. Among various possible forms of individual contributions to the Gini found in the literature, the paper shows that only one form satisfies a set of desirable properties. This form can be used for decomposing the Gini into population subgroups. An empirical illustration shows the use of this approach.
Inside Inequality in the Arab Republic of Egypt : Facts and Perceptions across People, Time, and Space

(Washington, DC: World Bank, 2014-04-02) Verme, Paolo ; Milanovic, Branko ; Al-Shawarby, Sherine ; El Tawila, Sahar ; Gadallah, May ; A. El-Majeed, Enas Ali

This book joins four papers prepared in the framework of the Egypt inequality study financed by the World Bank. The first paper prepared by Sherine Al-Shawarby reviews the studies on inequality in Egypt since the 1950s with the double objective of illustrating the importance attributed to inequality through time and of presenting and compare the main published statistics on inequality. To our knowledge, this is the first time that such a comprehensive review is carried. The second paper prepared by Branko Milanovic turns to the global and spatial dimensions of inequality. The objective here is to put Egypt inequality in the global context and better understand the origin and size of spatial inequalities within Egypt using different forms of measurement across regions and urban and rural areas. The Egyptian society remains deeply divided across space and in terms of welfare and this study unveils some of the hidden features of this inequality. The third paper prepared by Paolo Verme studies facts and perceptions of inequality during the period 2000-2009, the period that preceded the Egyptian revolution. The objective of this part is to provide some initial elements that could explain the apparent mismatch between inequality measured with household surveys and inequality aversion measured by values surveys. No such study has been carried out before in the Middle-East and North-Africa (MENA) region and this seemed a particular important and timely topic to address in the light of the unfolding developments in the Arab region. The fourth paper prepared by Sahar El Tawila, May Gadallah and Enas Ali A. El-Majeed assesses the state of poverty and inequality among the poorest villages of Egypt. The paper attempts to explain the level of inequality in an effort to disentangle those factors that derive from household abilities from those factors that derive from local opportunities. This is the first time that such study is conducted in Egypt. The book should be of interest to any observer of the political and economic evolution of the Arab region in the past few years and to poverty and inequality specialists that wish to have a deeper understanding of the distribution of incomes in Egypt and other countries in the MENA region.
Social Assistance and Poverty Reduction in Moldova, 2001-2004 : An Impact Evaluation

(World Bank, Washington, DC, 2008-06) Verme, Paolo

This paper assesses the impact of social assistance benefits on household welfare in Moldova. Ignoring standard issues of impact evaluations such as selection bias, behavioral responses, unobserved heterogeneity and endogeneity, an incidence analysis suggests that increased spending on social assistance enhances the probability of moving out of poverty and reduces the probability of moving into poverty. However, double difference estimates (based on a mimicked randomized experiment) and parametric estimates (based on panel data) indicate that social benefits have not contributed to improve household welfare or reduce poverty. Double difference estimates point to a negative impact on welfare. Parametric estimates do not yield any consistent significant impact on welfare or poverty. The author concludes that the growth in population coverage and expenditure on cash benefits that characterized social assistance policies in recent years has not resulted in a significant improvement in welfare, all other factors being equal.
Constraints to Growth and Job Creation in Low-Income Commonwealth of Independent States Countries

(World Bank, Washington, DC, 2006-04) Verme, Paolo

Despite sustained output growth since 1997, low-income Commonwealth of Independent States (CIS) countries (CIS-7) have not experienced growth in employment, a phenomenon observed elsewhere in transitional economies and labeled as "jobless growth." The author addresses the causes of this phenomenon in the CIS-7. He argues that the lack of job creation is explained by a combination of structural factors, including capital-intensive growth, large potential for productivity gains among existing workers, and compartmentalized economies best depicted by a dual labor market framework. Agriculture and industry have performed asymmetrically and grown apart during the recession and during the growth periods. Agriculture provides subsistence and refuge from urban poverty and unemployment but is unable to grow beyond subsistence because it is disconnected from industrial manufacturing and because the agricultural infrastructure is depleted and underinvested. Industry has progressively lost its manufacturing capacity, and focuses on capital-intensive, highly productive sectors, and provides good wages for the few highly skilled workers. With governments and the international community currently refraining from investing in agricultural and industrial policies focused on reviving manufacturing, jobless growth is likely to persist.
A Multiple Correspondence Analysis Approach to the Measurement of Multidimensional Poverty in Morocco, 2001–2007

(World Bank, Washington, DC, 2012-06) Ezzrar, Abdeljaouad ; Verme, Paolo

The measurement of multidimensional poverty has been advocated by most welfare scholars and is experiencing a growth in interest, partly explained by controversial debates that have emerged across academics and practitioners. This paper follows one of the least explored approaches -- Multiple Correspondence Analysis -- to assess multidimensional poverty in Morocco between 2001 and 2007. Multiple Correspondence Analysis provides two major advantages for the measurement of multidimensional poverty: it generates a matrix of "weights" based on the variance-covariance matrix of all welfare dimensions selected and provides a natural approach for constructing a composite welfare indicator that satisfies essential poverty ordering axioms. The application shows that poverty in Morocco has declined according to both monetary and multidimensional indicators and that these findings are robust to stochastic dominance tests. The paper concludes that the sustained positive growth that Morocco experienced during the last decade has translated in improvements in living conditions well beyond monetary returns.
Intergenerational Impact of Population Shocks on Children's Health: Evidence from the 1993-2001 Refugee Crisis in Tanzania

(World Bank, Washington, DC, 2019-12) Wang Sonne, Soazic Elise ; Verme, Paolo

This paper examines how parents' early childhood exposure to a refugee crisis impacts their children's health status. Based on Demographic and Health Survey data from Tanzania with the migration history of mothers and fathers, the analysis exploits geographical, time, and cohort variations using shock intensity and distance from refugee camps to instrument treatment. The findings show that children who were born to parents who were living closer to refugee camps during their early childhood have lower height for their age and are more likely to be stunted. The results are robust to alternative functional forms of the distance from camps, alternative specifications of the treatment and control groups, alternative cohorts of mothers, and several placebo tests.
The Income Lever and the Allocation of Aid

(Taylor and Francis, 2014-09-24) Ceriani, Lidia ; Verme, Paolo

The article develops a concept and a measure of the monetary capacity of a country to reduce its own poverty and shows how these tools can be used to guide budget allocations or the allocation of aid. The authors call this concept the income lever. Making use of tax and distributive theory, the article shows how different redistributive criteria correspond to the different normative criteria of the income lever. It then constructs various income lever indexes based on these criteria and uses such indexes to rank countries according to their own capacity to reduce poverty.