nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2005‒08‒13
ten papers chosen by
Maximo Rossi
Universidad de la República

  1. Persistence in inequalities across the Spanish regions By Jesús Rodríguez; Diego Romero de Ávila; Diego Martínez-López
  2. Why Do Most Italian Young Men Live With Their Parents? Intergenerational Transfers and Household Structure By Manacorda, Marco; Moretti, Enrico
  3. Work and Leisure in the US and Europe: Why So Different? By Alesina, Alberto F; Glaeser, Edward L; Sacerdote, Bruce
  4. Job changes, hours changes and labour market flexibility: panel data evidence for Britain By Richard Blundell; Mike Brewer; Marco Francesconi
  5. Incentives and Prosocial Behavior By Roland Bénabou; Jean Tirole
  6. Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond By James J. Heckman; Lance J. Lochner; Petra E. Todd
  7. Inequality By Edward L. Glaeser
  8. Gender and Assimilation Among Mexican Americans By Francine D. Blau; Lawrence M. Kahn
  9. More Income Equality or Not? An Empirical Analysis of Individuals’ Preferences By María A. García-Valiñas; Roberto Fernández Llera; Benno Torgler
  10. Socially-Improving Tax Reforms By Paul Makdissi; Jean-Yves Duclos

  1. By: Jesús Rodríguez (Universidad Pablo de Olavide); Diego Romero de Ávila (Universidad Pablo de Olavide); Diego Martínez-López (Centro de Estudios Andaluces y Univesidad Pablo de Olavide)
    Abstract: In this paper we investigate several issues concerning persistence in inequalities of relative income per capita among the Spanish regions over 1980-2002. For that purpose we take a Bayesian approach which extends the work by Canova and Marcet (1995). Firstly, we study to what extent there exists a fixed effect bias in the standard cross-section estimates, and we find that the speed of convergence is indeed underestimated. Secondly, we provide a battery of results in which steady states and convergence rates have been obtained for a continuum of prior distributions. Finally, we also deal with persistence in inequalites by determining whether initial conditions matter in the distribution of regional steady states, and our conclusion is that regional disparities tend to persist over time in Spain.
    Keywords: Convergence, Inequalities, Bayesian Econometrics, Gibbs sampling
    JEL: C11 O47 R11
    Date: 2005
  2. By: Manacorda, Marco; Moretti, Enrico
    Abstract: More than 80% of Italian men aged 18-30 live with their parents. We argue that one contributing factor to this remarkably high rate of cohabitation is parents’ tastes for co-residence. In order to investigate the role of parental preferences, we estimate the effect of exogenous changes in parental income on rates of cohabitation in Italy using SHIW micro-data from 1989 to 2000. The key econometric issue is the potential endogeneity of parental income. In order to identify a source of exogenous variation in parental income, we use changes in fathers’ retirement age induced by the 1992 reform of the Italian Social Security system as an instrumental variable for parental income. By raising retirement age, this reform forced some fathers to remain in the labour market longer than they would have otherwise, therefore raising their disposable income. We use a two-sample instrumental variable (TSIV) strategy. Our TSIV estimates indicate that a rise in parents’ income significantly raises the children’s propensity to live at home: a 10% increase in annual parental income results in approximately a 10% rise in the proportion of boys living with their parents. Although we cannot definitely rule out alternative interpretations, these results are consistent with our hypothesis that cohabitation is a normal good for Italian parents.
    Keywords: family structure; living arrangements; two-sample IV
    JEL: H55 J12 J61
    Date: 2005–06
  3. By: Alesina, Alberto F; Glaeser, Edward L; Sacerdote, Bruce
    Abstract: Americans average 25.1 working hours per person in working age per week, but the Germans average 18.6 hours. The average American works 46.2 weeks per year, while the French average 40 weeks per year. Why do western Europeans work so much less than Americans? Recent work argues that these differences result from higher European tax rates, but the vast empirical labour supply literature suggests that tax rates can explain only a small amount of the differences in hours between the US and Europe. Another popular view is that these differences are explained by long-standing European ‘culture’, but Europeans worked more than Americans as late as the 1960s. In this paper, we argue that European labour market regulations, advocated by unions in declining European industries who argued ‘work less, work all’ explain the bulk of the difference between the US and Europe. These policies do not seem to have increased employment, but they may have had a more society-wide influence on leisure patterns because of a social multiplier where the returns to leisure increase as more people are taking longer vacations.
    Keywords: europe; hours worked; labour unions; taxation
    JEL: E00 J30
    Date: 2005–07
  4. By: Richard Blundell (Institute for Fiscal Studies and University College London); Mike Brewer (Institute for Fiscal Studies); Marco Francesconi (Institute for Fiscal Studies and ISER, Essex University)
    Abstract: This study uses the first twelve waves of the British Household Panel Survey covering the period 1991-2002 to investigate the extent of constraints on desired hours of work within jobs and the degree of flexibility of the labour market for a sample of women. Our main findings are as follows. First, the largest movements in hours worked are observed for workers who change their jobs. Second, about 40 percent of the women in the sample are not putting in the hours they would like. Most of them (mainly full-timers) would like to work fewer hours at the prevailing hourly wage. Again, women who change job experience the greatest hours changes, especially if they are over- or under-employed. Third, there is evidence of hours constraints. The hours movements among quitters are up to 5 hours greater than the movements among stayers. Fourth, we do not detect systematic time trends in the relationship between hours changes and job changes. But there is some evidence that overemployed women find it increasingly more difficult to move towards their desired hours even after changing job. Fifth, the evidence on a flexible labour market is mixed. We find only partial support for the hypothesis that overemployed or underemployed quitters receive compensating wage differentials if the new job does not satisfy their hours preferences, as well as for the hypothesis that quitters get a wage premium when they end up moving to jobs that constraint their desired hours.
    Keywords: Job mobility; Hours constraints; Labour supply preferences; Hours-wage trade-off; Part-time employment.
    JEL: C23 H31 I38 J12 J13 J22
    Date: 2005–07
  5. By: Roland Bénabou (Princeton University, CEPR, NBER and IZA Bonn); Jean Tirole (Institut d’Economie Industrielle (IDEI), GREMAQ, CERAS and MIT)
    Abstract: We develop a theory of prosocial behavior that combines heterogeneity in individual altruism and greed with concerns for social reputation or self-respect. Rewards or punishments (whether material or image-related) create doubt about the true motive for which good deeds are performed and this "overjustification effect" can induce a partial or even net crowding out of prosocial behavior by extrinsic incentives. We also identify settings that are conducive to multiple social norms and those where disclosing one’s generosity may backfire. Finally, we analyze the choice by public and private sponsors of incentive levels, their degree of confidentiality and the publicity given to agents’ behavior. Sponsor competition is shown to potentially reduce social welfare.
    Keywords: altruism, rewards, motivation, esteem, crowding out, overjustification effect, identity, social norms, morals, greed, psychology
    JEL: D64 D82 H41 Z13
    Date: 2005–07
  6. By: James J. Heckman (University of Chicago, University College London, American Bar Foundation and IZA Bonn); Lance J. Lochner (University of Western Ontario); Petra E. Todd (University of Pennsylvania and IZA Bonn)
    Abstract: Numerous studies regress log earnings on schooling and report estimated coefficients as "Mincer rates of return". A more recent literature uses instrumental variables. This chapter considers the economic interpretation of these analyses and how the availability of repeated cross section and panel data improves the ability of analysts to estimate the rate of return. We consider under what conditions the Mincer model estimates an ex post rate of return. We test and reject the model on six cross sections of U.S. Census data. We present a general nonparametric approach for estimating marginal internal rates of return that takes into account tuition, income taxes and forms of uncertainty. We also contrast estimates based on a single cross-section of data, using the synthetic cohort approach, with estimates based on repeated cross-sections following actual cohorts. Cohort-based models fitted on repeated cross section data provide more reliable estimates of ex post returns. Accounting for uncertainty affects estimates of rates of return. Accounting for sequential revelation of information calls into question the validity of the internal rate of return as a tool for policy analysis. An alternative approach to computing economic rates of return that accounts for sequential revelation of information is proposed and the evidence is summarized. We distinguish ex ante from ex post returns. New panel data methods for estimating the uncertainty and psychic costs facing agents are reviewed. We report recent evidence that demonstrates that there are large psychic costs of schooling. This helps to explain why persons do not attend school even though the financial rewards for doing so are high. We present methods for computing distributions of returns ex ante and ex post. We review the literature on IV estimation. The link of the estimates to the economics is not strong. The traditional instruments are weak, and this literature has not produced decisive empirical estimates. We exposit new methods that interpret the economic content of different instruments within a unified framework.
    Keywords: rate of return to schooling, internal rate of return, uncertainty, psychic costs, panel data, distribution
    JEL: C31
    Date: 2005–07
  7. By: Edward L. Glaeser
    Abstract: This paper reviews five striking facts about inequality across countries. As Kuznets (1955) famously first documented, inequality first rises and then falls with income. More unequal societies are much less likely to have democracies or governments that respect property rights. Unequal societies have less redistribution, and we have little idea whether this relationship is caused by redistribution reducing inequality or inequality reducing redistribution. Inequality and ethnic heterogeneity are highly correlated, either because of differences in educational heritages across ethnicities or because ethnic heterogeneity reduces redistribution. Finally, there is much more inequality and less redistribution in the U.S. than in most other developed nations.
    JEL: J0
    Date: 2005–08
  8. By: Francine D. Blau; Lawrence M. Kahn
    Abstract: Using 1994-2003 CPS data, we study gender and assimilation of Mexican Americans. Source country patterns, particularly the more traditional gender division of labor in the family in Mexico, strongly influence the outcomes and behavior of Mexican immigrants. On arrival in the United States, immigrant women have a higher incidence of marriage (spouse present), higher fertility, and much lower labor supply than comparable white natives; wage differences are smaller than labor supply differences, and smaller than comparable wage gaps for men. Immigrant women's labor supply assimilates dramatically: the ceteris paribus immigrant shortfall is virtually eliminated after twenty years. While men experience moderate wage assimilation, evidence is mixed for women. Rising education in the second generation considerably reduces raw labor supply (especially for women) and wage gaps with nonhispanic whites. Female immigrants' high marriage rates assimilate towards comparable natives', but immigrant women and men remain more likely to be married even after long residence. The remaining ceteris paribus marriage gap is eliminated in the second generation. Immigrants' higher fertility does not assimilate toward the native level, and, while the size of the Mexican American- white native fertility differential declines across generations, it is not eliminated.
    JEL: J1 J2 J3 J6
    Date: 2005–08
  9. By: María A. García-Valiñas; Roberto Fernández Llera; Benno Torgler
    Abstract: Do people prefer a society with an extensive social welfare system with high taxes, or low taxes but lax redistributive policies? Although economists have for a long time investigated the trade-off mechanism between equity and efficiency, surprisingly little information is available about citizens’ preferences over the distribution of income in a society. The aim of this paper is reduce this shortcoming, investigating in an empirical study working with World Values Survey, what shapes individuals’ preferences for income equality in Spain. We present evidence that not only traditional economic variables are relevant to be considered, but also factors such as ideology, political interest, fairness perception about others or trust in institutions, are key determinants to understand preferences towards redistribution and equality.
    Keywords: redistribution; inequality; welfare state; social capital
    JEL: H23 H53 I31
    Date: 2005–07
  10. By: Paul Makdissi (Département d'économique, Université de Sherbrooke); Jean-Yves Duclos (Pavillon De sève, Université Laval, Sainte-Foy, Québec, Canada)
    Abstract: This paper proposes graphical methods to determine whether commodity-tax changes are socially improving , in the sense of improving social welfare or decreasing poverty for large classes of social welfare and poverty indices. It also derives estimators of critical poverty lines and economic efficiency ratios which can be used to characterize socially-improving tax reforms. The statistical properties of the various estimators are derived in order to make the method implementable using survey data. The methodology is illustrated using Mexican data.
    Keywords: Social welfare, Poverty, Efficiency, Tax Reform, Stochastic Dominance
    JEL: D12 D63 H21 I32
    Date: 2001

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