nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2007‒08‒27
six papers chosen by
Maximo Rossi
University of the Republic

  1. Robust Multiperiod Poverty Comparisons By Johannes Gräb; Michael Grimm
  2. Measuring Changes in Multidimensional Inequality - An Empirical Application By Nilsson, Therese
  3. Income, Aging, Health and Wellbeing Around the World: Evidence from the Gallup World Poll By Angus Deaton
  4. The Value of Life Near its End and Terminal Care By Gary Becker; Kevin Murphy; Tomas Philipson
  5. Income Distribution: Effects on Growth and Development By Nancy Birdsall
  6. Well-Being in the Small and in the Large By Andrew K. Rose

  1. By: Johannes Gräb (University of Goettingen); Michael Grimm (University of Göttingen)
    Abstract: We propose a new methodology for comparing poverty over multiple periods across time and space that does not arbitrarily aggregate income over various years or rely on arbitrarily specified poverty lines or poverty indices. Following Duclos et al. (2006a), we use the multivariate stochastic dominance methodology to create dominance surfaces for different time spans. We elaborate the method first for the bidimensional case, using as dimensions income observed over two periods: one at the beginning and one at the end of a time span. Subsequently, we extend it to the case where incomes are observed over n-periods. We illustrate our approach by performing poverty comparisons using data for Indonesia and Peru.
    Date: 2007–07–27
  2. By: Nilsson, Therese (Department of Economics, Lund University)
    Abstract: During the past decade there has been a growing opinion of including more than an income perspective in the examination of inequality. As a result a broad theoretical literature on the subject of multidimensional inequality is present. This can mainly be divided into three different parts: item-by-item, non-aggregative and aggregative approach. However, there is hitherto no agreement over the measurement of inequality when each individual or household is characterized by a variety of attributes of wellbeing. In addition, there are less empirical examinations applying a multidimensional perspective to inequality. We apply three existing techniques, one from each of the mentioned strands of the theoretical literature, to the particular question of whether multidimensional inequality increased or decreased in Zambia between 1998 and 2004 using household indicators on expenditures, educational level, health status and land holdings. The purpose is to assess strengths and weaknesses of these theoretical methods in an empirical context and accordingly review their usefulness for measurement and policy analysis. Our examination points to that inequality comparisons taking interrelations between attributes into account repeatedly are at odds with comparisons of independent distributions. Consequently, if employing the item-by-item approach, at minimum, one should check the correlations between welfare distributions. The assessment of the aggregative approach show evidence of that different dimensions of wellbeing compensate and reinforce each other with respect to inequality in an empirical context. However, a majority of the results are very sensitive to the degree of substitution between attributes chosen. Sensitivity analyses and explicitness should thus accompany examinations of this kind. In applying a non-aggregative approach few combinations fulfill the required dominance conditions. Accordingly, generality and less imposed structure come at a cost. We conclude that the empirical usefulness of these existing techniques is reasonable as long as we stay aware of intrinsic weaknesses. Clearly, careful interpretations and analyzes involving more than one technique is constructive to portray multidimensional inequality.
    Keywords: Multidimensional inequality; inequality indices; stochastic dominance; expenditures; education; health; land holdings; Zambia
    JEL: D31 D63 I19 I29 Q15
    Date: 2007–08–18
  3. By: Angus Deaton
    Abstract: During 2006, the Gallup Organization conducted a World Poll that used an identical questionnaire for national samples of adults from 132 countries. I analyze the data on life satisfaction (happiness) and on health satisfaction and look at their relationships with national income, age, and life-expectancy. Average happiness is strongly related to per capita national income; each doubling of income is associated with a near one point increase in life satisfaction on a scale from 0 to 10. Unlike most previous findings, the effect holds across the range of international incomes; if anything, it is slightly stronger among rich countries. Conditional on national income, recent economic growth makes people unhappier, improvements in life-expectancy make them happier, but life-expectancy itself has little effect. Age has an internationally inconsistent relationship with happiness. National income moderates the effects of aging on self-reported health, and the decline in health satisfaction and rise in disability with age are much stronger in poor countries than in rich countries. In line with earlier findings, people in much of Eastern Europe and in the countries of the former Soviet Union are particularly unhappy and particularly dissatisfied with their health, and older people in those countries are much less satisfied with their lives and with their health than are younger people. HIV prevalence in Africa has little effect on Africans' life or health satisfaction; the fraction of Kenyans who are satisfied with their personal health is the same as the fraction of Britons and higher than the fraction of Americans. The US ranks 81st out of 115 countries in the fraction of people who have confidence in their healthcare system, and has a lower score than countries such as India, Iran, Malawi, or Sierra Leone. While the strong relationship between life-satisfaction and income gives some credence to the measures, as do the low levels of life and health satisfaction in Eastern Europe and the countries of the former Soviet Union, the lack of correlations between life and health satisfaction and health measures shows that happiness (or self-reported health) measures cannot be regarded as useful summary indicators of human welfare in international comparisons.
    JEL: I1 I31 O1 O15 O57
    Date: 2007–08
  4. By: Gary Becker; Kevin Murphy; Tomas Philipson
    Abstract: Medical care at the end of life, which is often is estimated to contribute up to a quarter of US health care spending, often encounters skepticism from payers and policy makers who question its high cost and often minimal health benefits. It seems generally agreed upon that medical resources are being wasted on excessive care for end-of-life treatments that often only prolong minimally an already frail life. However, though many observers have claimed that such spending is often irrational and wasteful, little explicit and systematic analysis exists on the incentives that determine end of life health care spending. There exists no positive theory that attempts to explain the high degree of end-of life spending and why differences across individuals, populations, or time occur in such spending. This paper attempts to provide the first rational and systematic analysis of the incentives behind end of life care. The main argument we make is that existing estimates of the value of a life year do not apply to the valuation of life at the end of life. We stress the low opportunity cost of medical spending near ones death, the importance of keeping hope alive in a terminal care setting, the larger social value of a life than estimated in private demand settings, as well as the insignificance in quality of life in lowering its value. We derive how an ex-ante perspective in terms of insurance and R&D alters some of these conclusions.
    JEL: I1 I11 I18 I32 I39 J0
    Date: 2007–08
  5. By: Nancy Birdsall
    Abstract: I review the literature on the effects of inequality on growth and development in the developing world. Two stylized facts emerge from empirical studies: inequality is more likely to harm growth in countries at low levels of income (below about $3200 per capita in 2000 dollars); and it is at high levels of inequality (at or above a Gini coefficient of .45) that a negative association emerges. Between 15 and 40 percent of the developing world's population lives in countries with these characteristics, depending on the inclusion of China, whose level of inequality has recently been measured at almost .45. Theory and evidence suggest that high inequality affects growth: (1) through interaction with incomplete and underdeveloped markets for capital and information; (2) by discouraging the evolution of the economic and political institutions associated with accountable government (which in turn enable a market environment conducive to investment and growth); and (3) by undermining the civic and social life that sustains effective collective decision-making.
    Keywords: Income distribution, inequality, poverty, growth, development, institutions,
    JEL: O11 O15 O43
    Date: 2007–04
  6. By: Andrew K. Rose (University of California)
    Abstract: Is it better to live in a big county than a small country? In this paper I examine whether economic and social conditions vary systematically with the population of a country. Economics provides a number of theoretical reasons why country size should matter, for instance because of increasing returns to scale or because it is easier to provide public goods to a larger populace. However there is little empirical evidence that links the scale of a country size to any of a multitude of indicators of economic and social welfare.
    Date: 2006–11

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