nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2007‒02‒24
eleven papers chosen by
Maximo Rossi
University of the Republic

  1. Identity, Dignity and Taboos: Beliefs as Assets By Bénabou, Roland; Tirole, Jean
  2. Inequality and income gaps By Ian Preston
  3. Wage risk and employment risk over the life cycle By Hamish Low; Costas Meghir; Luigi Pistaferri
  4. "Class Structure and Economic Inequality" By Edward N. Wolff; Ajit Zacharias
  5. Minimum Wages, the Earned Income Tax Credit, and Employment: Evidence from the Post-Welfare Reform Era By David Neumark; William Wascher
  7. NEW GLOBAL POVERTY COUNTS By Nanak Kakwani; Hyun H. Son
  8. Unemployment as Disequilibrium in a Model of Aggregate Labor Supply By Orley Ashenfelter
  9. Estimating the Union-Non-union Wage Differential: A Statistical Issue By John Abowd; Charles Mulvey
  10. What is Involuntary Unemployment? By Orley Ashenfelter
  11. Education, Unemployment and Earnings By Orley Ashenfelter; John Ham

  1. By: Bénabou, Roland; Tirole, Jean
    Abstract: We analyze social and economic phenomena involving beliefs which people value and invest in, for affective or functional reasons. Individuals are at times uncertain about their own 'deep values' and infer them from their past choices, which then come to define 'who they are'. Identity investments increase when information is scarce or when a greater endowment of some asset (wealth, career, family, culture) raises the stakes on viewing it as valuable (escalating commitments). Taboos against transactions or the mere contemplation of tradeoffs arise to protect fragile beliefs about the 'priceless' value of certain assets (life, freedom, love, faith) or things one 'would never do'. Whether such behaviours are welfare-enhancing or reducing depends on whether beliefs are sought for a functional value (sense of direction, self-discipline) or for 'mental consumption' motives (self-esteem, anticipatory feelings). Escalating commitments can thus lead to a 'hedonic treadmill', and competing identities cause dysfunctional failures to invest in high-return activities (education, adapting to globalization, assimilation), or even the destruction of productive assets. In social interactions, norm violations elicit a forceful response (exclusion, harassment) when they threaten a strongly held identity, but further erode morale when it was initially weak. Concerns for pride, dignity or wishful thinking lead to the inefficient breakdown of Coasian bargaining even under symmetric information, as partners seek to self-enhance and shift blame by turning down 'insultingly low' offers.
    Keywords: anticipatory utility; bargaining; hedonic treadmill; identity; memory; religion; self-control; self-image; self-serving beliefs; taboos; wishful thinking
    JEL: D81 D91 Z13
    Date: 2007–02
  2. By: Ian Preston (Institute for Fiscal Studies and University College London)
    Abstract: <p>This paper discusses inequality orderings based explicitly on closing up of income gaps, demonstrating the links between these and other orderings, the classes of functions preserving the orderings and applications showing their usefulness in comparison of economic policies.</p>
    Keywords: Inequality, income distribution
    JEL: D31 D63
    Date: 2006–12
  3. By: Hamish Low (Institute for Fiscal Studies and Trinity College, Cambridge); Costas Meghir (Institute for Fiscal Studies and University College London); Luigi Pistaferri
    Abstract: This paper decomposes the sources of risk to income that individuals face over their lifetimes. We distinguish productivity risk from employment risk and identify the components of each using the Survey of Income and Program Participation and the Panel Study of Income Dynamics. Estimates of productivity risk contolling for employment risk and for individual labour supply choices are substantially lower than estimates that attribute all wage variation to productivity risk. We use a partial equilibrium life-cycle model of consumption and labour supply to analyse the choices individuals make in the light of these risks and to measure the welfare cost of the different types of risk. Productivity risk induces a considerably greater welfare loss than employment risk primarily because productivity shocks are more persistent. Reflecting this, the welfare value of government programs such as food stamps which partially insure productivity risk is greater than the value of unemployment insurance which provides (partial) insurance against employment risk and no insurance against persistent shocks.
    Keywords: Uncertainty, life-cycle models, unemployment, precautionary savings
    JEL: D91 H31 J64
    Date: 2006–12
  4. By: Edward N. Wolff; Ajit Zacharias
    Abstract: Existing empirical schemas of class structure do not specify the capitalist class in an adequate manner. We propose a schema in which the specification of capitalist households is based on wealth thresholds. Individuals in noncapitalist households are assigned class locations based on their position in the labor process. The schema is designed to address the question of the relationship between class structure and overall economic inequality. Our analysis of the U.S. data shows that class divisions among households, especially the large gaps between capitalist households and everyone else, contribute substantially to overall inequality.
    Date: 2007–01
  5. By: David Neumark; William Wascher
    Abstract: We study the effects of minimum wages and the EITC in the post-welfare reform era. For the minimum wage, the evidence points to disemployment effects that are concentrated among young minority men. For young women, there is little evidence that minimum wages reduce employment, with the exception of high school dropouts. In contrast, evidence strongly suggests that the EITC boosts employment of young women (although not teenagers). We also explore how minimum wages and the EITC interact, and the evidence reveals policy effects that vary substantially across different groups. For example, higher minimum wages appear to reduce earnings of minority men, and more so when the EITC is high. In contrast, our results indicate that the EITC boosts employment and earnings for minority women, and coupling the EITC with a higher minimum wage appears to enhance this positive effect. Thus, whether or not the policy combination of a high EITC and a high minimum wage is viewed as favorable or unfavorable depends in part on whose incomes policymakers are trying to increase.
    JEL: H24 I38 J2 J38
    Date: 2007–02
  6. By: Nanak Kakwani (International Poverty Centre, United Nations Development Programme); Hyun H. Son (International Poverty Centre, United Nations Development Programme)
    Abstract: This paper proposes a new measure of the unemployment rate. This measure takes into account not only people who are unemployed, but also those earning below the subsistence level of income in the labor market. The proposed methodology is applied to Brazil’s unit record household surveys covering the period between 1995 and 2004.
    Keywords: Open unemployment rate, Underemployment, Productive employment, Poverty
    JEL: J21 J23 J64 I32 D31
    Date: 2006–09
  7. By: Nanak Kakwani (International Poverty Centre, United Nations Development Programme); Hyun H. Son (International Poverty Centre, United Nations Development Programme)
    Abstract: The main objective of this study is to compute an international poverty threshold based on the food requirement to ensure an adequate calorie intake for the world’s poorest. The study proposes a new methodology based on consumer theory to provide a caloric based international poverty threshold. Using this methodology, the international poverty line is estimated to be equal to $1.22 in 1993 PPP exchange rates. According to this new yardstick, almost 1.37 billion people were poor around the world in 2001. The study also provides global estimates of hunger, according to which 13.28 percent of the world population – equivalent to 687 million people – suffered from hunger in 2001.
    Keywords: Poverty, Purchasing power parity, Global estimates
    JEL: I32 D31 O53 O57
    Date: 2006–09
  8. By: Orley Ashenfelter
  9. By: John Abowd; Charles Mulvey
  10. By: Orley Ashenfelter
  11. By: Orley Ashenfelter; John Ham

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