nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2006‒01‒24
six papers chosen by
Maximo Rossi
Universidad de la República

  1. What’s In a City?: Understanding the Micro-Level Employer Dynamics Underlying Urban Growth By R. Jason Faberman
  2. Is Britain Pulling Apart? Area Disparities in Employment, Education and Crime By Stephen Gibbons; Anne Green; Paul Gregg; Stephen Machin
  3. The Role of Equality and Efficiency in Social Preferences By Fehr, Ernst; Naef, Michael; Schmidt, Klaus M.
  4. Inequality of Opportunity in Brazil By Francois Bourguignon; Francisco H.B. Ferreira; Marta Menéndez
  5. Separating uncertainty from heterogeneity in life cycle earnings By Cunha, Flavio; Heckman, James; Navarro, Salvador
  6. Does Educational Tracking Affect Performance and Inequality? Differences-in-Differences Evidence across Countries By Eric A. Hanushek; Ludger Woessmann

  1. By: R. Jason Faberman (U.S. Bureau of Labor Statistics)
    Abstract: This paper synthesizes the literatures on labor dynamics and urban growth and agglomeration by presenting new evidence on the micro-level establishment dynamics of metropolitan areas. I explore how the patterns of job reallocation and entry and exit affect the growth and composition of these areas. I find that high-growth metropolitan areas have high rates of job and establishment turnover, primarily though higher rates of gross job creation and establishment entry, and have a relatively young distribution of establishments. Variations in the age distribution and differences in the entry and exit patterns of young establishments account for a sizeable portion of regional differences in labor dynamics and growth, even after controlling for regional differences in industry composition. These results suggest that variations in the age distribution and the dynamics that lead to such variations are important factors in understanding urban growth and agglomeration.
    Keywords: Job Reallocation; Urban Growth and Agglomeration; Firm Dynamics
    JEL: E24 J63 R11
    Date: 2005–12
  2. By: Stephen Gibbons; Anne Green; Paul Gregg; Stephen Machin
    Abstract: This paper explores the changing extent of concentration worklessness and deprivation in Britains communities over the last twenty years and seeks to identify what shapes patterns of relative affluence and deprivation. The paper goes on to explore the evidence that there are lasting consequences from concentrated deprivation for the residents, including children. The paper address issues of employment, educational outcomes and crime victimisation. Looking at the available evidence from the UK and abroad, the evidence suggests that concentrated deprivation has little effect on employment opportunities, (e.g. moving people to more affluent neighbourhoods would make little difference), has modest effects on childrens educational outcomes and propensity to get involved in deviant behaviours but substantial effects on crime victimisation. The paper then concludes on what policy agendas could be developed to address concentrated deprivation and above all its consequences on residents outcomes.
    Keywords: neighbourhoods, employment, education, crime
    JEL: R23 J61 I21
    Date: 2005–07
  3. By: Fehr, Ernst; Naef, Michael; Schmidt, Klaus M.
    Abstract: Engelmann and Strobel (AER 2004) question the relevance of inequity aversion in simple dictator game experiments claiming that a combination of a preference for efficiency and a Rawlsian motive for helping the least well-off is more important than inequity aversion. We show that these results are partly based on a strong subject pool effect. The participants of the E&S experiments were undergraduate students of economics and business administration who self-selected into their field of study (economics) and learned in the first semester that efficiency is desirable. We show that for non-economists the preference for efficiency is much less pronounced. We also find a non-negligible gender effect indicating that women are more egalitarian than men. However, perhaps surprisingly, the dominance of equality over efficiency is unrelated to political attitudes.
    Keywords: inequity aversion; preferences for efficiency; social preferences
    JEL: C7 C91 C92 D63 D64
    Date: 2005–12
  4. By: Francois Bourguignon (World Bank, Washington); Francisco H.B. Ferreira (World Bank, Washington); Marta Menéndez (Université Paris Dauphine)
    Abstract: This paper proposes a method to decompose earnings inequality into a component due to unequal opportunities and a residual term. Drawing on the distinction between ‘circumstance’ and ‘effort’ variables in John Roemer’s work on equality of opportunity, we associate inequality of opportunities with the inequality attributable to circumstances which lie beyond the control of the individual – such as her family background, her race and the region where she was born. We interpret the decomposition as establishing a lower bound on the contribution of opportunities to earnings inequality. We further decompose the effect of opportunities into a direct effect on earnings and an indirect component which works through the “effort” variables. The decomposition is applied to the distributions of male and female earnings in Brazil, in 1996. While the residual term is large, observed circumstances nevertheless account for around a quarter of the value of the Theil index. Parental education is by far the most important circumstance affecting earnings, dwarfing the effects of race and place of birth.
    Keywords: Inequality of opportunity, earnings inequality, intergenerational mobility
    JEL: D31 D63 J62
    Date: 2005–11–18
  5. By: Cunha, Flavio (University of Chicago); Heckman, James (University of Chicago); Navarro, Salvador (University of Chicago)
    Abstract: This paper develops and applies a method for decomposing cross section variability of earnings into components that are forecastable at the time students decide to go to college (heterogeneity) and components that are unforecastable. About 60 % of variability in returns to schooling is forecastable. This has important implications for using measured variability to price risk and predict college attendance.
    Keywords: earnings; unforecastable; forecastable
    JEL: C33 D84 I21
    Date: 2004–12–10
  6. By: Eric A. Hanushek (Hoover Institution, Stanford University, CESifo and NBER); Ludger Woessmann (Ifo Institute, University of Munich, CESifo and IZA Bonn)
    Abstract: Even though some countries track students into differing-ability schools by age 10, others keep their entire secondary-school system comprehensive. To estimate the effects of such institutional differences in the face of country heterogeneity, we employ an international differences-in-differences approach. We identify tracking effects by comparing differences in outcome between primary and secondary school across tracked and non-tracked systems. Six international student assessments provide eight pairs of achievement contrasts for between 18 and 26 cross-country comparisons. The results suggest that early tracking increases educational inequality. While less clear, there is also a tendency for early tracking to reduce mean performance. Therefore, there does not appear to be any equity-efficiency trade-off.
    Keywords: tracking, streaming, ability grouping, selectivity, comprehensive school system, educational performance, inequality, international student achievement test, TIMSS, PISA, PIRLS
    JEL: I2
    Date: 2005–12

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