nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2007‒03‒03
nine papers chosen by
Maximo Rossi
University of the Republic

  1. The Joint Design of Unemployment Insurance and Employment Protection. A First Pass By Blanchard, Olivier J; Tirole, Jean
  2. Women, Work and Culture By Fernández, Raquel
  3. International Remittances and Income Inequality: An Empirical Investigation By Valerie Koechlin; Gianmarco Leon
  4. Extreme incomes and the estimation of poverty and inequality indicators from EU-SILC By Van Kerm, Philippe
  5. Hypertension and Happiness across Nations By David G. Blanchflower; Andrew J. Oswald
  6. Is Well-being U-Shaped over the Life Cycle? By David G. Blanchflower; Andrew Oswald
  7. The Power of Positional Concerns: A Panel Analysis By Benno Torgler; Sascha L. Schmidt; Bruno S. Frey
  8. Leaky Bucket By Nanak Kakwani; Hyun H. Son
  9. Women's Earning Power and Wellbeing By Nanak Kakwani; Hyun H. Son

  1. By: Blanchard, Olivier J; Tirole, Jean
    Abstract: Unemployment insurance and employment protection are typically discussed and studied in isolation. ln this paper, we argue that they are tightly linked, and we focus on their joint optimal design in a simple model, with risk averse workers, risk neutral firms, and random shocks to productivity. We show that, in the 'first best', unemployment insurance comes with employment protection - in the form of layoff taxes; indeed, optimality requires that layoff taxes be equal to unemployment benefits. We then explore the implications of four broad categories of deviations from first best: limits on insurance, limits on layoff taxes, ex-post wage bargaining, and ex-ante heterogeneity of firms or workers. We show how the design must be modified in each case. Finally, we draw out the implications of our analysis for current policy debates and reform proposals, from the financing of unemployment insurance, to the respective roles of severance payments and unemployment benefits.
    Keywords: employment protection; experience rating; layoff taxes; layoffs; severance payments; unemployment benefits; Unemployment insurance
    JEL: D60 E62 H21 J30 J32 J38 J65
    Date: 2007–02
  2. By: Fernández, Raquel
    Abstract: This paper discusses some recent advances in the area of culture and economics and examines the effect of culture on a key economic outcome: female labour supply. To separate the effect of market variables and institutions from culture, I use an epidemiological approach, studying second-generation American women. I use both female LFP and attitudes in the women's country of ancestry as cultural proxies and show that both cultural proxies have quantitatively significant effects on women's work outcomes. The paper concludes with some suggestions for future empirical and theoretical research topics in this area.
    Keywords: attitudes; cultural transmission; endogenous preferences; female labour force participation; immigrants; World Value Survey
    JEL: J13 J21 Z10
    Date: 2007–02
  3. By: Valerie Koechlin (Grupo de Analisis para el Desarrollo (GRADE)); Gianmarco Leon (Inter-American Development Bank)
    Abstract: The aim of this paper is to provide comprehensive empirical evidence on the relationship between international remittances and income inequality. In simple cross-country regressions we find a non-monotonic link between these two variables when using ordinary least squares, instrumental variables; we also test our hypothesis using dynamic panel data methods. We provide evidence in support of existing theoretical work that accounts for network effects that describe how, in the first stages of migration history, there is an inequality-increasing effect of remittances on income inequality. Then, as the opportunity cost of migrating is lowered due to these effects, remittances sent to those households have a negative impact on inequality. We also show how education and the development of the financial sector can help countries to reach the inequality-decreasing section of the curve more quickly. Our results are robust to several empirical specifications, as well as for a wide variety of inequality measures.
    Keywords: Migration; International Remittances; Income distribution JEL Classification Codes: O1, O15, J16
    JEL: O1
    Date: 2006–10
  4. By: Van Kerm, Philippe (CEPS/INSTEAD)
    Abstract: Micro-data estimates of welfare indices are known to be sensitive to observations from the tails of the income distribution. It is therefore customary to make adjustments to extreme data before estimating inequality and poverty statistics. This paper systematically evaluates the impact of such adjustments on indicators estimated from the EU-SILC (Community Statistics on Income and Living conditions) which is expected to become the reference source for comparative statistics on income distribution and social exclusion in the EU. Emphasis is put on the robustness of cross-country comparisons to alternative adjustments. Results from a sensitivity analysis considering both simple, classical adjustments and a more sophisticated approach based on modelling parametrically the tails of the income distribution are reported. Reassuringly, ordinal comparisons of countries are found to be robust to variants of data adjustment procedures. However, data adjustments are far from innocuous. Cardinal comparisons of countries reveal sensitive to the treatment of extreme incomes, even for seemingly small adjustments.
    Keywords: social indicators; poverty and inequality ; extreme incomes ; parametric tail ; EU-SILC
    Date: 2007–02
  5. By: David G. Blanchflower; Andrew J. Oswald
    Abstract: A modern statistical literature argues that countries such as Denmark are particularly happy while nations like East Germany are not. Are such claims credible? The paper explores this by building on two ideas. The first is that psychological well-being and high blood-pressure are thought by clinicians to be inversely correlated. The second is that blood-pressure problems can be reported more objectively than mental well-being. Using data on 16 countries, the paper finds that happier nations report lower levels of hypertension. The paper's results are consistent with, and seem to offer a step towards the validation of, cross-national estimates of well-being.
    JEL: I10
    Date: 2007–02
  6. By: David G. Blanchflower; Andrew Oswald
    Abstract: Recent research has argued that psychological well-being is U-shaped through the life cycle. The difficulty with such a claim is that there are likely to be omitted cohort effects (earlier generations may have been born in, say, particularly good or bad times). Hence the apparent U may be an artifact. Using data on approximately 500,000 Americans and Europeans, this paper designs a test that makes it possible to allow for different birth-cohorts. A robust U-shape of happiness in age is found. Ceteris paribus, well-being reaches a minimum, on both sides of the Atlantic, in people's mid to late 40s. The paper also shows that in the United States the well-being of successive birth-cohorts has gradually fallen through time. In Europe, newer birth-cohorts are happier.
    JEL: I1 J0
    Date: 2007–02
  7. By: Benno Torgler; Sascha L. Schmidt; Bruno S. Frey
    Abstract: Many studies have established that people care a great deal about their relative economic position and not solely, as standard economic theory assumes, about their absolute economic position. However, behavioral evidence is rare. This paper provides an empirical analysis on how individuals’ relative income position affects their performance. Using a unique data set for 1040 soccer players over a period of eight seasons, our analysis suggests that if a player’s salary is below the average and this difference increases, his performance worsens and the productivity decreasing effects of positional concerns are stronger. Moreover, the larger the income differences within a team, the stronger positional concern effects are observable. We also find that the more the players are integrated in a particular social environment (their team), the more evident a relative income effect is. Finally, we find that positional effects are stronger among high performing teams.
    Keywords: Relative income, positional concerns, envy, performance, social integration
    Date: 2007–02–27
  8. By: Nanak Kakwani (International Poverty Centre); Hyun H. Son (International Poverty Centre)
    Keywords: Poverty, Social welfare, Leakage, Gini index
    Date: 2005–06
  9. By: Nanak Kakwani (International Poverty Centre); Hyun H. Son (International Poverty Centre)
    Keywords: Poverty, Gender, Unpaid work
    Date: 2006–04

This nep-ltv issue is ©2007 by Maximo Rossi. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.