An IMF Agenda for Balancing Efficiency and Equity
Prakash Loungani, Chief of Development Macroeconomics at the IMF Research Department, writes about the gap in IMF's existing policy framework, with respect to concerns about technology-induced job losses in the short-run, and provides key recommendations aimed at harnessing the long-run benefits of technology adoption.
Chief, Development Macroeconomics, IMF Research Department Advisory Group Member, JustJobs Network & Senior Fellow, OCP Policy Center
As advancements in digital technology and the growing ‘shared’ economy transform the world of work, familiar fears about their impact on jobs have resurfaced. On one hand, technological advancements hold potential to boost productivity, the demand for labor and the quantity and quality of jobs. These in turn can lead to long-run efficiency and equity at a global level. On the other hand, as Prakash Loungani, Chief of Development Macroeconomics at the International Monetary Fund (IMF) Research Department, writes in this chapter, “policy makers must acknowledge and address the displacement that results from the use of new technology. Without appropriate policy frameworks to manage these changes, fears about the short-run job losses will trump the longer-run benefits of technology adoption”.
Against this backdrop, Loungani explains how the evolution in the IMF’s policy advice – increasingly geared toward balancing the efficiency and equity effects of labor market developments – is relevant to the way in which policymakers deal with the impact of transformations in technology on the nature and quantum of jobs worldwide.
The IMF is increasingly paying attention to the distributional consequences of economic developments and policies, the need to strike a balance between promoting efficiency and protecting the basic needs of workers, and the importance of adopting a ‘two-handed’ approach to job-creation; one that recognizes the importance of both aggregate demand and aggregate supply, and advocates policies to boost both.
With concrete policy recommendations that reflect the evolution in the IMF’s advice based on its research, Loungani solidifies his argument for increased redistribution as a way of ensuring that the benefits of technology are shared by all – something that the current policy efforts are not successfully delivering on.
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