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2019 | OriginalPaper | Chapter

8. Does Monetary Policy Impact the Effects of Shares of Manufacturing Employment Shocks on Income Inequality?

Authors : Eliphas Ndou, Thabo Mokoena

Published in: Inequality, Output-Inflation Trade-Off and Economic Policy Uncertainty

Publisher: Springer International Publishing

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Abstract

Evidence reveals that unexpected increase in the manufacturing, tradeable, and mining sector employment shares, leads to significant reduction in income inequality. The reduction in income inequality, due to shocks from these sectors’ employment shares, is amplified by low inflationary environment (that is, the consumer price inflation below or equal to 6 %). In addition, the reduction in income inequality is further amplified by the low repo rate level when consumer price inflation is below the 6 % threshold. This evidence reveals that inflation regimes matter for expansionary monetary policy to influence the reduction in income inequality due to improved manufacturing sector employment share.

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previous chapter Does Financial Globalisation Impact the Link Between Monetary Policy and Income Inequality?
next chapter Is There a Role for the Monetary Policy Channel in Transmitting Positive Shocks to the Services Sector Employment Shares to Income Inequality?
Footnotes
1
In addition, the report suggests that there are prospects for developing economies to gain ground towards advanced economy income levels. In addition, the WEO (2018) noted the displacement of workers from the manufacturing sector to services sector in the advanced economies coincided with a rise in income inequality and the increase was driven by larger disparities in earnings across all sectors. Topalova (2005) suggests that the benefits of liberalisation must be realised at substantial social costs, unless additional policies are devised to redistribute some gains from the winners to the losers.
 
2
Policymakers should heed that demand for manufactures increases faster than demand for food and services in the earlier stages of development; however, the reverse happens at the later stages of a country’s development. However, the decline in the relative price of manufactures could dampen the relative shift away from their consumption as income grows (WEO 2018).
 
3
The tradeable sector refers to the sum of the manufacturing and mining sector employment shares as a per cent of total non-agricultural employment.
 
Literature
Gumata, N., & Ndou, E. (2017). Labour market and fiscal policy adjustments to shocks: The role and implications for price and financial stability in South Africa. Cham, Switzerland: Palgrave Macmillan.
Topalova, P. (2005). Trade liberalisation, poverty and inequality: Evidence from Indian districts (NBER Working Chapter No. 11614).
Metadata
Title
Does Monetary Policy Impact the Effects of Shares of Manufacturing Employment Shocks on Income Inequality?
Authors
Eliphas Ndou
Thabo Mokoena
Copyright Year
2019
Book
Inequality, Output-Inflation Trade-Off and Economic Policy Uncertainty

Print ISBN: 978-3-030-19802-2

Electronic ISBN: 978-3-030-19803-9

Copyright Year: 2019

DOI
https://doi.org/10.1007/978-3-030-19803-9_8