nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2006‒10‒21
nine papers chosen by
Maximo Rossi
Universidad de la Republica

  1. The personal and general risks of age-related female infertility: Is there an optimistic bias or not? By Lampi, Elina
  2. Wage Structure and Public Sector Employment: Sweden versus the United States 1970-2002 By Domeij, David; Ljungqvist, Lars
  3. Rising Earnings Inequality in Sweden: The Role of Composition and Prices By Domeij, David
  4. The Evolution of Top Incomes in an Egalitarian Society; Sweden, 1903–2004 By Roine, Jesper; Waldenstrom, Daniel
  5. Wage Structure and Labor Mobility in Norway 1980–1997 By Hunnes, Arngrim; Møen, Jarle; Salvanes, Kjell G.
  6. A new Keynesian model with unemployment By Olivier Blanchard; Jordi Gali
  7. Optimal Inequality/Optimal Incentives: Evidence from a Tournament By Richard B. Freeman; Alexander M. Gelber
  8. The Determinants of Motherhood and Work Status: a Survey By Daniela Del Boca; Marilena Locatelli
  9. Health, Welfare and Inequality By Gabriella Berloffa; Agar Brugiavini; Dino Rizzi

  1. By: Lampi, Elina (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Based on a survey of a random sample of 1800 Swedish females aged 20-40 this paper investigates: (1). whether women are aware that the risk of female infertility increases with age, (2). whether the perceptions of the personal risk and the general risk in the own age group differ from each other, and (3). what factors can explain this possible difference between the stated personal and general risks. The results show that women do know that the likelihood of being infertile increases with age. However, they are less aware of the magnitude of this increase; especially the general risk levels given for women over age 34 are highly overestimated. A majority of the respondents aged 30 and older state a lower personal risk than a general risk for other women of the same age; thus, there seems to be an optimistic bias. This bias is even stronger for women who are also mothers. Thus, people with a positive personal previous experience feel that they are less vulnerable to the risk of infertility compared to others, while those without this kind of experience do not. If those who are mothers actually have a lower risk of infertility than others, then there of course is no bias. However, it is very unlikely that all women currently without children actually have a higher than average risk of infertility. <p>
    Keywords: personal risk; general risk; female infertility; optimistic bias
    JEL: D81 I10 J13
    Date: 2006–10–14
  2. By: Domeij, David (Dept. of Economic Statistics, Stockholm School of Economics); Ljungqvist, Lars (Dept. of Economic Statistics, Stockholm School of Economics)
    Abstract: Swedish census data and tax records reveal an astonishing wage compression; the Swedish skill premium fell by more than 30 percent between 1970 and 1990 while the U.S. skill premium, after an initial decline in the 1970s, rose by 8--10 percent. Since then both skill premia have increased by around 10 percentage points in 2002. Theories that equalize wages with marginal products can rationalize these disparate outcomes when we replace commonly used measures of total labor supplies by private sector employment. Our analysis suggests that the dramatic decline of the skill premium in Sweden is the result of an expanding public sector that today comprises roughly one third of the labor force, and that expansion has largely taken the form of drawing low-skilled workers into local government jobs that service the welfare state.
    Keywords: Skill premium; employment; private sector; public sector; Sweden; United States.
    JEL: E24 J31
    Date: 2006–09–16
  3. By: Domeij, David (Dept. of Economic Statistics, Stockholm School of Economics)
    Abstract: This paper decomposes the rise in cross-sectional earnings inequality in Sweden between 1990 and 2002 into changes in market prices of observable characteristics, changes in the composition of the labor force across demographic groups and industries, and changes in unobservables, and compares the Swedish experience with that in the U.S. The rise in earnings inequality is in both countries a consequence of rising upper tail dispersion. Contrary to the U.S. experience, where the rise is largely driven by changing market prices of observables and increased residual dispersion, shifts in the Swedish labor force composition have contributed positively to the rise in the P90-P50 gap. The rise in the Swedish P99-P90 gap is however entirely accounted for by changes in prices and residual dispersion.
    Keywords: Earnings; inequality; Sweden; United States
    JEL: E24 J31
    Date: 2006–10–03
  4. By: Roine, Jesper (Stockholm School of Economics); Waldenstrom, Daniel (Research Institute of Industrial Economics)
    Abstract: This study presents new homogenous series of top income shares in Sweden over the period 1903–2004. We find that, starting from levels of inequality approximately equal to those in other Western countries at the time, the income share of the Swedish top decile drops sharply over the first eighty years of the twentieth century. Most of the decrease takes place before the expansion of the welfare state and by 1950 Swedish top income shares were already lower than in other countries. The fall is almost entirely due to a dramatic drop in the top percentile explained mostly by decreases in capital income, while the lower half of the top decile – consisting mainly of wage earners – experiences virtually no change over this period. In the past decades top income shares evolve very differently depending on whether capital gains are included or not. When included, Sweden’s experience resembles that in the U.S. and the U.K. with sharp increases in top incomes. Excluding capital gains, Sweden looks more like the continental European countries where top income shares have remained relatively constant. A possible interpretation of our results is that Sweden over the past 20 years has been a country where it is more important to make the right financial investments than to earn a lot to become rich.
    Keywords: Income inequality; Income distribution; Wealth distribution; Top incomes; Welfare state; Sweden; Taxation; Capital gains
    JEL: D31 H20 J30 N30
    Date: 2006–06–21
  5. By: Hunnes, Arngrim (Dept. of Economics, Norwegian School of Economics and Business Administration); Møen, Jarle (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration); Salvanes, Kjell G. (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: To what extent do different firms follow different wage policies? How do such policies affect worker mobility between firms, and what are the effects of different wage bargaining regimes? The empirical branch of personnel economics has long been hampered by a lack of representative data sets. Norway is one of a handful of countries that has produced rich linked employer–employee data suitable for such analysis. This paper has three parts. First, we describe the wage setting and employment protection institutions in Norway. Next, we describe the Norwegian data sets. Finally, we document a large number of stylized facts regarding wage structure and labor mobility within and between Norwegian firms. Our main data set covers white-collar workers in the manufacturing and private sectors for the period 1980–1997. We also have blue-collar data for the 1986–1997 period covering the core of the manufacturing sector. Information about occupations, monthly wages, hours worked and bonuses is available, as well as various worker and firm characteristics.
    Keywords: Wage Structure; Labor Mobility
    JEL: J31
    Date: 2005–09–12
  6. By: Olivier Blanchard (MIT; NBER); Jordi Gali (Barcelona, Universitat Pompeu Fabra (UPF), Centre de Recerca en Economia Internacional (CREI); CEPR; NBER)
    Abstract: We develop a utility based model of fluctuations, with nominal rigidities, and unemployment. In doing so, we combine two strands of research: the New Keynesian model with its focus on nominal rigidities, and the Diamond-Mortensen-Pissarides model, with its focus on labor market frictions and unemployment. In developing this model, we proceed in two steps. We first leave nominal rigidities aside. We show that, under a standard utility specification, productivity shocks have no effect on unemployment in the constrained efficient allocation. We then focus on the implications of alternative real wage setting mechanisms for fluctuations in unemployment. We then introduce nominal rigidities in the form of staggered price setting by firms. We derive the relation between inflation and unemployment and discuss how it is influenced by the presence of real wage rigidities. We show the nature of the tradeoff between inflation and unemployment stabilization, and we draw the implications for optimal monetary policy
    Keywords: new Keynesian model, labor market frictions, search model, unemployment, sticky prices, real wage rigidities
    JEL: E32 E50
    Date: 2006–10
  7. By: Richard B. Freeman; Alexander M. Gelber
    Abstract: This paper examines performance in a tournament setting with different levels of inequality in rewards and different provision of information about individual's skill at the task prior to the tournament. We find that that total tournament output depends on inequality according to an inverse U shaped function: We reward subjects based on the number of mazes they can solve, and the number of solved mazes is lowest when payments are independent of the participants' performance; rises to a maximum at a medium level of inequality; then falls at the highest level of inequality. These results are strongest when participants know the number of mazes they solved relative to others in a pre-tournament round and thus can judge their likely success in the tournament. Finally, we find that cheating/fudging on the experiment responds to the level of inequality and information about relative positions. Our results support a model of optimal allocation of prizes in tournaments that postulate convex cost of effort functions.
    JEL: A0 H0 J0
    Date: 2006–10
  8. By: Daniela Del Boca; Marilena Locatelli
    Abstract: In this paper we present important empirical evidence regarding recent trends in women’s participation and fertility in European countries, and provide several interpretations of the differences across countries. Several recent analyses have considered labour supply and fertility as a joint decision and have explicitly taken into account the endogeneity of fertility in labour market participation decisions of women. We survey microeconomic analyses that explore the impact of social policies on the joint decisions of labor market participation and fertility. The results of most analyses indicate that social policies, taking into account several variables (family background, the allocation of time within the household, religion and culture), have a very relevant role in explaining different degrees of incompatibility between employment and child rearing across different countries. The incompatibilities between motherhood and careers find reconciliation in policies that enhance employment flexibility and diminish the potential opportunity costs of children.
    Keywords: Labor Market Decisions, Fertility, Child care, Family Policies
    JEL: J2 C3 D1 H31
    Date: 2006–10
  9. By: Gabriella Berloffa (University of Trento); Agar Brugiavini (Department of Economics, University Of Venice Cà Foscari); Dino Rizzi (Department of Economics, University of Venice Cà Foscari)
    Abstract: This paper uses data from the Health and Retirement Study (HRS) to study the relationship between health status and economic welfare at household level. We develop a model to estimate the welfare cost of ill health by exploiting the methodology of the equivalence scales. The crucial variables in this approach are, besides the health status (measured in several dimensions), the economic decisions of the household which can be directly related to health conditions, such as health-related expenses. By estimating a demand system we derive health-equivalence scales to learn about the cost of health conditions on economic welfare, controlling for other covariates. Our estimates suggest that – when taking account of health – the welfare of households in poor health drops substantially and inequality increases. There are important social welfare costs associated with differences in the health status of the elderly in the USA.
    Keywords: welfare cost, health, inequality
    JEL: I12 I31 J14
    Date: 2006

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