Economic lab

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Does higher economic growth necessarily reduce poverty?

Push growth and compare GDP per person with two poverty measures. Anchored poverty uses a fixed line (60% of today's median); relative poverty moves with the median. Do they tell the same story?

Horizon

Policy levers

14 levers changed

Taxes

Top income-tax rate52%

20% – 70% · Verdania today 35%

Basic income-tax rate28%

5% – 40% · Verdania today 22%

Corporate tax rate25%

5% – 45% · Verdania today 25%

Capital-income tax rate30%

0% – 50% · Verdania today 20%

Capital-gains tax rate30%

0% – 50% · Verdania today 15%

VAT rate22%

0% – 25% · Verdania today 12%

Work and wages

Minimum wage (share of median wage)55%

30% – 70% · Verdania today 45%

Collective-bargaining coverage80%

10% – 90% · Verdania today 35%

Unemployment-benefit replacement rate65%

0% – 80% · Verdania today 40%

Public services and transfers

Public health spending6.5% of output

1% – 7% · Verdania today 4.5%

Public education spending5.5% of output

2% – 8% · Verdania today 4.2%

Public infrastructure investment3.5% of output

1% – 8% · Verdania today 3%

Guaranteed minimum income (share of baseline median)25%

0% – 60% · Verdania today 20%

Ownership

Cooperative / worker-owned capital share10%

0% – 50% · Verdania today 3%

Public ownership of capital15%

0% – 80% · Verdania today 10%

Fiscal ruleWhen the budget is in deficit

Challenge this resultNo assumptions changed

Every result rests on assumptions about how people and firms respond, and economists disagree about many of them. Change any assumption within its published range. Both the baseline and your scenario use your value, and it stays fixed in every uncertainty draw.

Contested

Researchers disagree, sometimes on the direction of the effect.

Investment response to (1 - corporate tax)0.5

0 – 1 · central 0.5

Investment response to profit share0.5

0 – 1 · central 0.5

Crowding-out of private investment by deficits0.3

0 – 1 · central 0.3

Unemployment response to minimum-wage bite0.05

−0.05 – 0.2 · central 0.05

Unemployment response to replacement rate0.03

0 – 0.08 · central 0.03

Unemployment response to labour-tax rate0.05

0 – 0.15 · central 0.05

Unemployment response to bargaining coverage0

−0.02 – 0.04 · central 0

TFP-growth effect of collective ownership share0

−0.02 – 0.01 · central 0

Theoretical

Grounded in theory, with little direct measurement.

Labour-share response to bargaining coverage0.1

0 – 0.25 · central 0.1

Labour-share response to minimum-wage bite0.05

0 – 0.15 · central 0.05

Wage compression from bargaining0.15

0 – 0.3 · central 0.15

Human-capital growth per point of education spending (3-year lag)0.1

0 – 0.25 · central 0.1

Human-capital growth per point of health spending (1-year lag)0.05

0 – 0.15 · central 0.05

Empirical range

The range comes from published studies.

Capital elasticity of output0.35

0.3 – 0.4 · central 0.35

Output elasticity of public capital0.08

0 – 0.15 · central 0.08

Taxable-income elasticity of top earners0.25

0.1 – 0.5 · central 0.25

Synthetic

A modelling choice for this fictional country.

Private capital depreciation0.06

0.04 – 0.08 · central 0.06

Public capital depreciation0.04

0.03 – 0.05 · central 0.04

Trend TFP growth0.01

0.005 – 0.015 · central 0.01

Retained share of after-tax operating surplus0.1

0.05 – 0.2 · central 0.1

Base interest rate on public debt0.04

0.03 – 0.06 · central 0.04

Debt risk premium per unit of debt above 60% of output0.05

0.02 – 0.1 · central 0.05

Share of catastrophic-spending households forgoing care0.5

0.3 – 0.8 · central 0.5

Results · Year 10 vs baseline

Recalculating…