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Economists have long sought to predict how macroeconomic shocks willaffect individual welfare. Macroeconomic data and forecasts are easilyavailable when crises strike. But policy action requires not onlyunderstanding the magnitude of a macro shock, but also identifyingwhich households or individuals are being hurt by (or benefit from) thecrisis.A popular solution is to extrapolate the welfare impact of a shockfrom the historical response of income or consumption poverty tochanges in output, by estimating an 'elasticity' of poverty togrowth. Although this method provides an estimate for the aggregatepoverty impact of a macro shock, it has limited value for analysts andpolicymakers alike. Aggregate numbers are useful to capture theattention of policymakers and the international community, but in theabsence of any information on who is affected and to what extent,provide little guidance on what actions need to be taken.This volume outlines a more comprehensive approach to the problem,showcasing a microsimulation model, developed in response to demandfrom World Bank staff working in countries and country governments inthe wake of the global financial crisis of 2008-09. Starting with theidea of using simple macroeconomic projections as the 'macrolinkages' to a micro behavioral model built from household data,the model was conceptualized, refined and tested in a diverse mix ofcountries: Bangladesh, Philippines, Mexico, Poland and Mongolia. Theresults fed into country policy dialogue and lending operations of Bankteams, as well as various reports, research papers and briefs.

This paper attempts to determine the extent to which inequality in wage earnings in the Russian Federation is unfair. Unlike other similar attempts that can, at best, produce a lower bound on the estimate of the share of inequality that is unfair, this paper exploits the longitudinal nature of the data to come up with a lower bound as well as an upper bound. The upper bound is further refined to take into account the indirect effect of circumstances at birth (gender, parental wealth, etc.) on effort. Results show that the upper bound on the inequality of opportunity may be three to four times the measured lower bound and significantly higher for females than males in the sample. Finally, comparison with the United States and Germany show that although total inequality is lower in Russia, the share of unfair inequality is distinctly larger. The markedly large explanatory role of extraneous factors, such as gender and parental characteristics, in wage inequality calls for a close examination of governments' efforts to address inequities in the labor market.

In recognition that poverty and vulnerability are mutually reinforcing, because the poor lack the ability to insure against risks, often shaping behavior and decision making to minimize exposure to risks, even at the cost of economic efficiency, and long-term interest, this paper reviews what is known about the risk-coping, and risk-mitigating behavior of the poor in South Asia. It examines the support received from the governments, and nongovernmental organizations, as well as the Bank's contributions, and, presents suggestions for a strategy to reduce poverty, and efforts to overcome risk. Analytical work classifies the risks that threaten different vulnerable groups, or poor households, according to poverty incidence and severity, and, a similar effort evaluates both the risk-reducing impact of anti-poverty programs, and the performance and potential of less traditional approaches, such as micro-finance. On assessing government programs, the study evaluates the role, impact, and potential of policy mechanisms, or strategies commonly used in the region, reviewing welfare programs in public works, transfers in cash or kind, innovative programs for savings and insurance services, and pension reforms, as well as how to expand such programs. The study argues on the need for a comprehensive social protection strategy that can address both poverty, and vulnerability, identifying the priorities of vulnerable groups, and specific risks, to then develop an implementation structure, and institutional reforms that expand market opportunities which facilitate formal mechanisms for risk management.

A country where an individual's chances of success depend little on the socio-economic success of his or her parents is said to be a country with high relative intergenerational mobility. A government's motivation for seeking to improve mobility is arguably two-fold. There is a fairness argument and an economic efficiency argument. When mobility is low, it means that individuals are not operating on a level playing field. The odds of someone born to parents from the bottom of their generation will be stacked against him or her. This is not only unfair but also leads to a waste of human capital, as talented individuals may not be given the opportunity to reach their full potential. Reducing this inefficiency will raise the stock of human capital and thereby stimulate economic growth. Since the waste of human capital tends to be concentrated toward the bottom of the distribution, the growth brought about by mobility-promoting policy interventions tends to be of an inclusive nature, in line with the spirit of Sustainable Development Goal (SDG) 10 on reducing inequality. For large parts of the world's population, individual education is still too closely tied to the education of one's parents, and there is a clear divide between the high-income and developing world. The patterns observed globally are also observed within Europe. Intergenerational mobility (or equality of opportunity) is visibly lower in the new member states (i.e. Eastern Europe), where national incomes are lower. Raising investment in the human capital of poor children towards levels that are more comparable to the investment received by children from richer families will curb the importance of parental background in determining an individual's human capital. Countries at any stage of development can raise intergenerational mobility by investing more to equalise opportunities. The evidence strongly suggests that public interventions are more likely to increase mobility when: a) public investments are sufficiently large, b) are targeted to benefit disadvantaged families/ neighbourhoods, c) focus on early childhood, and d) when there is a low degree of political power captured by the rich.

A country where an individual's chances of success depend little on the socio-economic success of his or her parents is said to be a country with high relative intergenerational mobility. A government's motivation for seeking to improve mobility is arguably two-fold. There is a fairness argument and an economic efficiency argument. When mobility is low, it means that individuals are not operating on a level playing field. The odds of someone born to parents from the bottom of their generation will be stacked against him or her. This is not only unfair but also leads to a waste of human capital, as talented individuals may not be given the opportunity to reach their full potential. Reducing this inefficiency will raise the stock of human capital and thereby stimulate economic growth. Since the waste of human capital tends to be concentrated toward the bottom of the distribution, the growth brought about by mobility-promoting policy interventions tends to be of an inclusive nature, in line with the spirit of Sustainable Development Goal (SDG) 10 on reducing inequality.For large parts of the world's population, individual education is still too closely tied to the education of one's parents, and there is a clear divide between the high-income and developing world. The patterns observed globally are also observed within Europe. Intergenerational mobility (or equality of opportunity) is visibly lower in the new member states (i.e. Eastern Europe), where national incomes are lower. Raising investment in the human capital of poor children towards levels that are more comparable to the investment received by children from richer families will curb the importance of parental background in determining an individual's human capital. Countries at any stage of development can raise intergenerational mobility by investing more to equalise opportunities. The evidence strongly suggests that public interventions are more likely to increase mobility when: a) public investments are sufficiently large,b) are targeted to benefit disadvantaged families/ neighbourhoods, c) focus on early childhood, and d) when there is a low degree of political power captured by the rich.

India is uniquely placed to help reduce global poverty and boost prosperity. The country has the largest number of poor people in the world, as well are the largest number of people who have recently escaped poverty. There is an emerging middle class but the majority of people are still vulnerable to falling back into poverty. What lessons do the past two decades offer for what it will take for the country to sustain progress and bring about deeper changes? This synthesis brings together the key insights from extensive and in-depth research conducted by the World Bank on India's experience in reducing poverty and sharing prosperity over the last two decades. The beginning chapter of the synthesis offers an overview of the trends in living standards and mobility in India. This is followed by a chapter on the main drivers of poverty reduction. The third chapter sheds light on some of the gaps India needs to fill for sustaining mobility and spreading prosperity more widely.