Watson Institute for International and Public Affairs
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Markets and Social Inequality

It is hard to overstate the importance of markets in determining the changing patterns of inequality that have emerged in the last two decades. Sustained economic growth in Brazil, India, and China, which has raised incomes of 2 billion of the world’s poor and thus reduced inequality across nations, has been led by a rapid expansion in the international flows of goods and services involving these countries. At the same time, the emergence and development of both intra- and international markets has been associated with substantial increases in income inequality within many countries in both the developed and developing worlds. Making sense of these trends requires understanding how market forces interact with social structures and institutions.

Many Brown faculty members work on the relationship between markets and distribution. Initiative coordinator and Andrew Foster, an empirical microeconomist, has a long track record of research and training in this area. For example, he is researching the distributional consequences of the emergence of markets for irrigation water in India and the effects of trade on the spatial distribution of air quality in Mexico. Likewise, his collaboration with the National Council of Applied Economic Research (NCAER) in New Delhi, which sponsors a 40-year panel study of approximately 10,000 households in rural India, offers a unique opportunity to study changes in income distribution and mobility and how these have been affected by the emergence and integration of markets. Brown faculty members have also studied financial markets to understand the impact on distribution. Ross Levine is a leading economist in the area of financial markets. He and colleagues have on-going projects on the impact of banking regulation on allocation of loans and how this process affects, among other things, racial differences in wages. Barbara Stallings works in this area too. She is particularly interested in access to finance for small firms in developing countries and how different kinds of financial systems lead to differential access. Stallings is leading a project at the Watson Institute on labor market flexibility and the impact on labor standards and treatment for workers. In Sociology, Jose Itzigsohn’s work examines the institutional and political factors that shape unskilled labor markets in the developing world, and John Logan is collaborating with our China partners on new housing markets in Chinese cities. Kaivan Munshi (Economics) and Nancy Luke (Sociology) are developing a new project to evaluate the role that communities play in India.