nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2006‒10‒28
eleven papers chosen by
Maximo Rossi
Universidad de la Republica

  1. Inequality: Measurement By Frank A Cowell
  2. The Caring Hand that Cripples: The East German Labour Market after Reunification By Merkl, Christian; Snower, Dennis J.
  3. Unemployment Accounts and Employment Incentives By Brown, Alessio J G; Orszag, Mike; Snower, Dennis J.
  4. Openness, Inequality and Poverty: Endowments Matter By de Melo, Jaime; Gourdon, Julien; Maystre, Nicolas
  5. Why gender based game theory? By Pablo Brañas-Garza
  6. Is fertility related to religiosity?-Evidence from Spain By Pablo Brañas-Garza; Shoshana Neuman
  7. Mind the gap? Estimating the effects of postponing higher education By Holmlund, Bertil; Liu, Qian; Nordström Skans, Oskar
  8. Differences in Wage Growth by Education Level: Do Less-Educated Workers Gain Less from Work Experience? By Helen Connolly; Peter Gottschalk
  9. The Income of the Swedish Baby Boomers By Lennart Flood; Anders Klevmarken; Andreea Mitrut
  10. Does Body Weight affect Wages? Evidence from Europe. By Giorgio Brunello; Beatrice d'Hombres
  11. Income Distribution, Institutions and Conflicts: An Exploratory Analysis for Latin America and the Caribbean By Leonardo Gasparini; Ezequiel Molina

  1. By: Frank A Cowell
    Abstract: This article provides a brief overview of the key issues in inequality measurement andhas been prepared for inclusion in the second edition of The New Palgrave.
    Keywords: inequality, social welfare, ranking.
    JEL: C13 D63
    Date: 2006–08
  2. By: Merkl, Christian; Snower, Dennis J.
    Abstract: The East German labor market has hardly made any progress since German reunification, despite massive migration flows and support from the West. We argue that East Germany is in trouble precisely because of the support it has received. This paper explores the phenomenon of 'the caring hand that cripples,' arising from bargaining by proxy, the adoption of the West German welfare system and the associated employment persistence. Even the steady decrease of labour cost (normalized by productivity) since the beginning of the 1990s did not help to kick start the East. We suggest that labor force participants fell into 'traps,' concerning low skills, ageing of the workforce, labour-saving capital and skills, capital underutilization, and unemployment arising from the decline of the tradeable sector.
    Keywords: German unification; labour market traps; labour markets
    JEL: E24 J3 P2
    Date: 2006–05
  3. By: Brown, Alessio J G; Orszag, Mike; Snower, Dennis J.
    Abstract: We explore the far-reaching implications of replacing current unemployment benefit (UB) systems by an unemployment accounts (UA) system. Under the UA system, employed people are required to make ongoing contributions to their UAs and the balances in these accounts are available to them during periods of unemployment. The government is able to undertake balanced-budget interpersonal redistributions among the UAs. At the end of their working lives, people could transfer the remaining balances on their UAs into their pensions. We present an analytical framework to analyse the incentive effects of UAs and calibrate our model for the high unemployment countries of Europe. Our results suggest that this policy reform would significantly change people's employment incentives and could achieve reductions in unemployment without reducing the level of support to the unemployed.
    Keywords: employment; redistribution; unemployment; unemployment accounts; unemployment benefits
    JEL: I38 J22 J32 J38 J64 J65 J68
    Date: 2006–06
  4. By: de Melo, Jaime; Gourdon, Julien; Maystre, Nicolas
    Abstract: Using tariffs as a measure of openness, this paper finds consistent evidence that the conditional effects of trade liberalization on inequality are correlated with relative factor endowments. Trade liberalization is associated with increases in inequality in countries well-endowed in highly skilled workers and capital or with workers that have very low education levels, and in countries relatively well-endowed in mining and fuels while it is associated with decreases in inequality in countries that are wellendowed with primary-educated labor. Similar results are also apparent when decile data are used instead of the usual Gini coefficient. The results are strongly supportive of the factor-proportions theory of trade and suggest that trade liberalization in poor countries where the share of the labor force with little education is high raises inequality, although in our sample relative endowments in capital turn out to be the overriding determinant so that trade liberalization is accompanied by reduced income inequality in low-income countries. Simulation results also suggest that relatively small changes in inequality as measured by aggregate measures of inequality like the Gini coefficient are magnified when estimates are carried out using decile data.
    Keywords: income distribution; international trade; poverty
    JEL: D3 F11 F16
    Date: 2006–07
  5. By: Pablo Brañas-Garza (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: The behavior of men and women in a number of games free of social issues is explored. The analysis is conducted for simple (2x2) and complex (guessing) games and in static and repeated settings. No gender effect is observed either in static nor in repeated games. It is concluded that gender bias vanishes in the absence of social issues.
    Keywords: Gender bias, dominated strategies, Nash equilibrium, learning.; Gender bias, dominated strategies, Nash equilibrium, learning.
    JEL: C91 J16 C72
    Date: 2006–10–19
  6. By: Pablo Brañas-Garza (Department of Economic Theory and Economic History, University of Granada); Shoshana Neuman (Departament of Economics, Bar-Ilan University)
    Abstract: Preferences, including preferences for children, are shaped during the formative years of childhood. It is therefore essential to include exposure to religious practice during childhood in an attempt to establish a link between religiosity and fertility. This path has not been explored in the documented literature that looks at the relationship between current religiosity (measured by one dichotomous church attendance variable) and fertility. The International Social Survey Programme: Religion 2 (ISSP) provides the data base. It includes information on maternal/paternal/own mass participation when the respondent was a child (nine levels each), as well as on his current churchgoing (six levels) and prayer habits (eleven levels).These variables are included as explanatory variables in 'fertility equations' that explain the number of children of Catholic women in Spain. The core findings are that exposure to religiosity during the formative years of childhood, has a pronounced effect on women's 'taste for children' that later on translates into the number of her offspring. The two parents have major effects on women. However, interestingly, while an intensively practicing father encourages the daughter to have more children (by about 0.8, on average), an intensively practicing mother has a negative effect on the daughter’s birth rate, leading to lower fertility by one child. Current religiosity seems to be irrelevant. It follows that religiosity and fertility are interrelated but the mechanism is probably different from the simplistic causality that is suggested in the literature.
    Keywords: fertility, religion, Catholic, Church attendance, prayer, parental religiosity, taste for children, Spain.
    JEL: Z12 J12 J13 D13
    Date: 2006–10–19
  7. By: Holmlund, Bertil (Department of Econoics, Uppsala University); Liu, Qian (Department of Economics, Uppsala University); Nordström Skans, Oskar (IFAU - Institute for Labour Market Policy Evaluation)
    Abstract: This paper estimates the effects on earnings of “gap years” between high school and university enrollment. The effect is estimated by means of standard earnings functions augmented to account for gap years and a rich set of control variables using administrative Swedish data. We find that postponement of higher education is associated with a persistent and non-trivial earnings penalty. The main source of the persistent penalty appears to be the loss of work experience after studies. Two years postponement reduces the present value of life time earnings by 40-50 percent of annual earnings at age 40.
    Keywords: timing of education; schooling interruptions; work experience
    JEL: I23 J24 J31
    Date: 2006–10–11
  8. By: Helen Connolly (Northeastern University); Peter Gottschalk (Boston College and IZA Bonn)
    Abstract: This paper revisits the old question of whether wage growth differs by education level. Do more educated workers invest more than less educated workers in firm specific, sector specific or general human capital? Do they gain more from improved job match? The paper makes both a methodological and a substantive contribution by offering an alternative strategy for separately identifying returns to general experience, sector specific experience, firm tenure, and job match. Our empirical results, based on the Survey of Income and Program Participation, show that overall wage growth is higher for more-educated workers. This reflects higher returns to general experience for college graduates and higher returns to sector experience for high school graduates. Improvements in job match grow monotonically with education.
    Keywords: low wage workers, returns to tenure, sector experience, general experience, job match
    JEL: J30
    Date: 2006–09
  9. By: Lennart Flood (Göteborg Univers and IZA Bonn); Anders Klevmarken (Uppsala University and IZA Bonn); Andreea Mitrut (Andreea Mitrut)
    Abstract: This paper studies the income of Swedish households belonging to the baby boom generation, i.e. those born in the 1940-50. An international comparison as well as an historical presentation of income patterns is given. However, the main purpose is to generate the future income of the baby boom generation as they get older. A major result is that the income standard of the young-old will become much higher than that of the very old. If our simulations bear the stamp of realism, they suggest that we will see new and large poverty in Sweden among the very old in the future. The pension system contributes to this result. The “front loaded” design gives with its reduced wage indexation a higher income immediately after retirement but a much lower income at older age. From this perspective it is unfortunate that so much attention is given to the discussion of replacement rates. The replacement rate, although interesting in itself, completely misses the long run effect and just provides a comparison of incomes shortly after with incomes before retirement. If we instead focus on the relative income of older pensioners, the results become quite different. Our results challenge the conception of a sustainable pension system. If the relative income of older pensioner’s drops and at the same time expenditures for health and care increase, one might wonder how the old in our society will make both ends meet. If pensions become too small to meet “minimum standards,” the requirement of financial sustainability of the pension system results in an increasing financial burden on other parts of the general social protection system.
    Keywords: pension system, micro simulation, replacement rate
    JEL: H24 H31 H55
    Date: 2006–10
  10. By: Giorgio Brunello (University of Padua); Beatrice d'Hombres (European Commission Joint Research Centre)
    Abstract: We use data from the European Community Household Panel to investigate the impact of body weight on wages in 9 European countries. When we pool the available data across countries and years, we find that a 10% increase in the average body mass index reduces the real earnings of males and females by 3.27% and 1.86% respectively. Since European culture, society and labour market are heterogeneous, we estimate separate regressions for Northern and Southern Europe and find that the negative impact of the body mass index on earnings is larger - and statistically significant - in the latter area.
    Keywords: wages, body mass index, Europe
    JEL: I12 J3
    Date: 2006–10
  11. By: Leonardo Gasparini (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) - Universidad Nacional de La Plata); Ezequiel Molina (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) - Universidad Nacional de La Plata)
    Keywords: income distribution, polarisation, cohesion, inequality, poverty, institutions, instability, conflict, corruption, Latin America, Caribbean
    JEL: I3 D3 D6
    Date: 2006–09

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