 But so this is an interest that I hope to build on after my PhD. Anyway, last year I fumbled on some new data on inequality in the Caribbean. And it appears that the data goes back from 1960 to 2013. Now, since 1960 to 2013, inequality has remained entrenched. And by inequality I mean top income shares, top 10%, top 1%, top 5%. Save and accept for countries like Belize, Jamaica, and Calgary called the other one. Inequality declining in those countries primarily because of what I'm arguing, exogenous shocks like hurricanes and so forth. So if we get new data in the future we should expect volatility and inequality data given the recent hurricanes. Now, so there's high inequality in the Caribbean and of course in the world we know given Piquet and so forth. Now an interesting thing about the Caribbean is that it's one of the major recipients of remittances in the world. Now I fumbled on the call for paper for this Ghana conference here. And it occurred to me that there might be a connection between remittances and inequality. Now I looked at the literature on remittances and growth and it's inconclusive. In some cases you see remittances increase economic growth, in some cases it reduces economic growth. There are some other studies, not many, on how remittances affect inequality and the measure of inequality in this case is a Gini coefficient, right? And once again that too is inconclusive. There aren't much theoretical work, however, on the connection between remittances and inequality. I hope to make some contribution in this direction. And hopefully at the end of the presentation I can explain why the literature is inconclusive, why we find in some cases remittances is growth intensive, in other cases it is not. So this is not a theoretical, this is not an empirical paper in any sense. There are some mathematics and so forth, but it should be very simple. Now the argument, the story is very simple. I'm arguing that remittances are important determinants of the functional income distribution. So not dealing with top income shares, we're not dealing with Gini coefficients, we're not dealing with T-Lindex. We're dealing with profit share, we're dealing with wage share. Now of course if you read Piketty you'll go back to Marx and the classical thinkers. There's strong theoretical argument and recently empirical support for how functional income distribution can lead to personal income distribution. So we can deal with Gini, we can deal with top income shares and the like. So this paper does not get into that. It focuses exclusively on the functional income distribution. Now I'm arguing that the channel is the labor supply decision. So in some countries you will find that remittances increase the functional income distribution or wage share and it might decrease the function distribution. And I'm arguing that has to do with the labor choice. Now given the ambiguous relationship between remittances and the functional income distribution we must expect therefore an ambiguous relationship between remittances and economic growth. Obviously therefore I'm arguing there is a connection between distribution and growth and there's lots of theoretical work, lots of empirical work in that direction. I'm not sure if you're familiar with the concept of wage and profit led growth. I'll say a bit more about it when we get into that. It's largely a post-Kinzian analytical concept. Anyway, so here we go. This is the basic work leisure setup. Very simple. Labor has a choice. Work. And by work I mean wage employment or leisure. Now in the paper I do extend the choice so you have wage employment, self-employment and leisure. But for this presentation we're just going to focus on wage employment versus leisure. Now what we have here is this is leisure, which is the difference between the total time endowment and hours work and this is the basic utility function, income and leisure hours. We have the basic budget constraints and this is the way the story is. So we have labor income being the sum of wage income from wage employment and V which is non-labor income. In this particular case I'm interested in remittances as an important source of non-labor income. I basically want to understand how would this non-labor income remittances affect the labor choice decision and I make a connection between that and the functional income distribution and then finally between that and growth. Now this is the basic Lagrangian. Everything else is basic is what we're familiar with. I have here if leisure is a normal good, we have the labor force inversely related to non-labor income where the reverse holds. Now we have a firm, we have a simple production technology where a firm combines labor hours with intermediate inputs to produce output Q or Q can be exported or consumed domestically and then we have the pricing decision of the firm which is basically a markup of a unit labor cost and intermediate inputs. Note that in the pricing decision here I have E which is normal exchange rate so we're dealing with a small open economy which fits the Caribbean and some other countries in Europe and even in Africa. Now this is the markup. The markup can be determined by number of factors. The traditional literature talks about a degree of monopoly but it can also be determined by public policy. So the markup basically represents the strengths of the bargaining power of employers so to speak and public policy whether it's for unions or against unions can certainly affect the bargaining power of employers and that would be represented by the markup. Now I have the cost of intermediate inputs. This is some cost of domestic capital and imported capital. Now I have here the firm's investment function. Now this is important because later on I want to make a connection between distribution and growth. So the firm's investment function is a basic post-keins investment function. Forgive the term post-keins. All this is saying is investment to firm level is a function of level profitability or profit shares, capacity utilization or aggregate demand and this is animal spirits in the traditional terminology or business confidence if you will. Now the goods market equilibrium I'm not going to focus on the role of government but I will talk about the role of government. If we do include the role of government the central findings will not change. I want to assume only profit income is saved to simplify the analysis. If we assume that some wages are saved that does not change the outcome. So we have an aggregate savings function where savings comes from profit so it's total profits rise, total savings rise. Now we have a current account equation where the trade balance sorry the trade balance, the current account balance is a function of domestic aggregate demand, foreign aggregate demand, net unilateral transfers to account for remittance inflow or capital flows and this is simply the real exchange rate. So what we have is the labor supply decision of the individual worker if you will, potential worker. Choose to work either in self-employment or wage employment or choose not to work. And then we have here the firm's pricing strategy which is a markup over total variable cost if you will. Then we have an investment function and a savings function and then we talk about the openness of the economy. So the goods market equilibrium, forgive me, the goods market equilibrium is basically where we have savings total to the trade balance plus the aggregate savings function. This is the basic IS square if you will which is this implicit solution here. Now basic, very elementary, K-intent stability condition is how does the economy adjust to excess demand. So there is excess demand meaning investment and the current account balance exceeds aggregate demand. How does the capacitalization or aggregate demand change? What we're showing here, this is a necessary condition for short-run stability. If aggregate demand increases in the economy, we expect a deterioration in the trade balance. So this is the basic income effect so to speak. And then we have here if aggregate demand were to increase, we expect excess demand to be eliminated as there's more leakage out of savings and there's increases in trade balance or investment. So all I've done here is to show that we can with a simple economy, very abstract, I get that, we can achieve basic goods market stable equilibrium. That's the first thing. Now we're going to get very briefly the wage-led and profit-led story. So a wage-led demand regime is if wage-sharing increases, aggregate demand increases in the given economy. It could be, and the empirical literature is divided, you find some countries are wage-led or profit-led. And by profit-led we mean if wage-sharing increases, aggregate demand falls. That's basically what it is. You can have the same story for profit-led or wage-led growth where if the wage-sharing increases, growth expands, that's wage-led. If the wage-sharing increases, growth declines, that's profit-led. Now I hope to show that these regimes are key to explaining why the literature is inconclusive. Now we get to the functional income distribution story and remittances. So very simple, we have aggregate income being the sum of wages where age is the sum of our work in the total economy and this is aggregate profits. Now aggregate profits can be defined as total prices minus total costs where this is the cost of intermediate inputs. Now this with a price for the individual firm, if you aggregate that you can say that this is aggregate price level equal to this here. So if we substitute these two into this equation nine, you get this as aggregate income. The sum of aggregate wage here, aggregate wage bill, forgive me, and the sum of the level of profits. Now if we divide this by the wage bill, we divide both sides by WH and take the inverse. We get the aggregate wage share. Now the aggregate wage share here is saying that if aggregate hours work in economy rises, the wage share rises. If labor productivity rises, the wage share rises and the same holds for hourly wage. But the wage share is inversely related to the level of the market or intermediate input costs. So we can tell a story here about bargaining power between what this market means. This market, as I said, illustrates the bargaining power of the firm. So there's a bargaining story here. There's a class conflict story, if you will, over this wage share. But there's also one that talks about hours work. Now we can rewrite this in terms of time in that one. So where T would be, aggregate time in that one in the overall economy, total leisure hours available in the economy, and what we see here is that remittances must affect the airport. So as long as remittances affect the leisure choice, it will affect the wage share. What does this mean then for countries that are major recipients of inequality? I can speak definitively for the Caribbean. Now I'm from South America, Guyana, but we speak English. So culturally we're Caribbean and we have an economic arrangement with the Caribbean. Now if you visit a Caribbean or Guyana, limers, is this term meaningful? A limer, a loiter? There are lots of loiter, lots of limers in the Caribbean space or in Guyana. So in a sense, these guys are not necessarily unemployed or even unemployed. They're just chilling. I mean, it may be difficult to imagine for some of you, I understand that, but from the space where I'm from, this is normal. How do you explain this reality? And I think remittances is a big part of the story. Anyway, so I have three theorems. All I'm saying here is that remittances is an important determinant of the wage share. Now if you have a flexible system and you have lots of remittance inflow, this will appreciate your exchange rate and therefore that will increase your wage share because this would fall. In a fixed exchange rate system, therefore that remittances will affect wage share only through the labor supply channel. But this is the exchange rate channel unlikely to be important. We know most countries have a managed flow to a fixed exchange rate system so that remittances will be only important through the labor supply channel. Now the basic story, if you pick up any work on the determinants of the wage share, they'll talk about class struggle. They'll talk about the degree of monopoly via the markups. They'll talk about aggregate prices. They'll talk about foreign exchange rate, et cetera. What I'm trying to say now, in addition to all these, is that remittances and through the labor supply decision, whether work or leisure, have an important role in determining the functional income distribution. Now I haven't seen any theoretical piece that tries to connect inequality, sorry, remittances with inequality generally, much as remittances and a functional income distribution. There is some empirical work in that, but even that is thin. Now, I want to connect this remittance story, this distribution story to growth. Now, for simplicity, let's keep this very simple. So we have the wage share here. So this is the last one we saw. We're just going to ignore all these intermediate inputs, et cetera, and the exchange rate movements. So the basic level, wage share is a positive function of our work, labor productivity, and inversely related to levy economic activity, and the markup. Why is inversely related to levy economic activity? I did that in the paper, so we can discuss that perhaps in the Q&A. Now, if you would to love this with respect to time, you see that this is the rate of change here, of the wage share. Now, I specify the rate of change of our work as this here. So what we're seeing here, this V is non-labor income remittances, and this parameter here, I think it's gamma. Can you see that clearly? This parameter, gamma, represents the preference for leisure. In this case, leisure is an inferior good with this parameter. This parameter represents leisure as a normal good, so that if the preference for leisure exceeds the preference, sorry, if leisure is an inferior good, if this preference exceeds the preference for leisure is a normal good, then we can see increases in our work. Is that clear? I'll repeat that. So this represents, this preference, meaning leisure in this case is an inferior good. That's what this parameter represents. This parameter says that leisure is a normal good. If this exceeds this, therefore, our work must expand. Now, after some substitution, that's what this becomes. Now, we need to specify the rate of change with non-labor income, or in this case, remittances. So I'm saying that the rate of change remittances has to do with an altruism parameter beta. So as altruism expands for our family or friends abroad, we expect the rate of remittances inflow to expand. Now, this says that remittances will increase, remittances inflow will increase. If the target wage share exceeds the actual wage share, in other words, what labor bargain for did it not get? So the expectations were not met, the target were not met, and in this case, we can assume that family will send more money abroad. Now, the target wage share is 1 minus the target profit share. And this is how we define the target profit share. In this case, all this is saying is, as our work increases or as employment increases, the bargaining power of the firm declines. That's all this says. Now, through some substitution, we get this as the final equation. So now we have two differential equations. I'm calling this here the wage share curve. Any point along this curve, the rate of change rate share is equal to zero. This I call the remittances curve. Any point, these terms might be changed later in the paper. This remittance curve here, any point along this curve, the rate of change remittances is equal to zero. So where they intersect, we have that dynamic equilibrium. Now, the wage share curve can either be upward sloping or downward sloping. It can be downward sloping if this exceeds this. And in that case, leisure is an inferior curve. If it's upward sloping, it means leisure is a normal curve. The remittance curve is always downward sloping. And then it looks something like this. So in this case, leisure is an inferior curve. In this case, leisure is a normal curve. This is a basic IS curve, specified earlier for wage-led economy. So simple exercise. Let's assume the altruism parameter expands, or increases, so that there's an increase in remittances and flows. So let's say, in this case, leisure is an inferior curve. So that remittances expands. Given that leisure is an inferior curve, hours of work will increase. Either hours of work in wage employment or time spent in self-employment. In that case, with an increase in remittances, wage share rises. Now, with an increase in the wage share in a small open economy, where in an open case in a small open economy, you have a profit-led dynamic, meaning the increase in the wage share for a small open economy reduces price competitiveness. So with remittance inflow and higher wage share, we get a shift to the left in the IS curve at a lower level of capacity utilization or lower growth if you have. So we can observe remittance inflow with higher wage share, surely a good thing, but poor economic performance. And this is the outcome of the preferences of workers in this given economy, where the preference for work is over leisure. If you have leisure as a normal good, with an increase in remittances from RC2 to RC3, what we see is a decline in the wage share from alpha O to alpha 3. Now, in a small open economy with lower wage share, external price competitiveness might be increased, and this can shift the IS curve outwards. So in this case, we have remittance inflow being growth-intensive. And that has to do with leisure. Sure, with leisure being a normal good. The point of this story is that if a given economy or a group of countries, leisure is a normal good, and it's a major recipient of remittances, you might find endemic or structural inequality, so to speak, or at least low wage shares, even though you might experience economic growth. So what we... And this is consistent with the evidence that passed three decades, meaning you have economic growth but rising inequality. In this case, I'm talking about wage shares. As explained earlier, this can translate into personal inequality. So as wage shares fall, we can expect up incomes to rise and so forth. What's the policy bang of this? We need to change preferences in a sense. If a given group of countries is going to be major recipients of remittances because of migration flows and so forth, and we expect that to occur in the foreseeable future, then we want to be in this equilibrium where remittances inflow and increase the wage share. Now, I recommend to increase the cost of leisure, the opportunity cost of leisure must rise, and therefore we can experiment with the higher minimum wages if we try to reduce labor market discrimination. Remittances in countries with ethnic conflict or poor societies, remittances can be an escape valve from the labor market. So if we can eliminate... If we can reduce labor market discrimination, it might incentivize people to work, even with remittance inflow. We can address in the paper to experiment with national internships at a high school level to create a work ethic. And the production diversification story addresses the second problem. So even if we were to deal with the work ethic problem, meaning with remittance inflow, we still work and therefore wage share rise, how do we deal with the decline in economic performance. Now this decline in economic performance in the paper is largely the outcome of a limited production base or a limited export portfolio. So remittance inflow, much of this, or much of this increase in wage share has spent on consumer durables which are largely imported and they tend to reduce your economic performance. So I recommend for that production diversification. We can discuss briefly what that means in the Q&A. I'm going to end it there. Thanks.