nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2008‒01‒05
eight papers chosen by
Maximo Rossi
University of the Republic

  1. What is Middle Class about the Middle Classes Around the World? By Banerjee, Abhijit; Duflo, Esther
  2. Women's Earning Power and the "Double Burden" of Market and Household Work By Natalie Chen; Paola Conconi; Carlo Perroni
  3. The Happiness Gains from Sorting and Matching in the Labor Market By Simon Luechinger; Alois Stutzer; Rainer Winkelmann
  4. The Marginal Utility of Income By Richard Layard; Guy Mayraz; Stephen J. Nickell
  5. Social Capital as Good Culture By Luigi Guiso; Paola Sapienza; Luigi Zingales
  6. Religion, attitudes towards working mothers and women’s labor market participation: Evidence for Germany, Ireland, and the UK By Guido Heineck
  7. Well-Being and Ill-Being: A Bivariate Panel Data Analysis By Wang-Sheng Lee; Umut Oguzoglu
  8. Aging and Death under a Dollar a Day By Abhijit V. Banerjee; Esther Duflo

  1. By: Banerjee, Abhijit; Duflo, Esther
    Abstract: This paper uses household surveys from 13 developing countries to describe consumption choices, health and education investments, employment patterns and other features of the of the economic lives of the “middle classes” defined as those whose daily consumption per capita is between $2 and $4 or between $6 and $10. The data shed lights on differences and similarities between the middle classes and the poor and helps discriminating between various theories of the role of the middle classes in the development process. We find that the average middle class person is not an entrepreneur in waiting: while he or she might run a business, this is usually a small, not very profitable business. The single most important characteristic of the middle class seems to be that they are more likely to be holding a steady job. Perhaps as a result, they also have fewer, healthier, and better educated children. While there are clear differences in consumption patterns between the poor and the middle classes, there are also very strong resemblance within countries, and contrasts across countries, which might either reflect the importance of relative prices in shaping consumption decisions or the power of norms/fashions in determining consumption.
    Keywords: consumption; development; investment; middle class
    JEL: I32 O10 O12
    Date: 2007–12
  2. By: Natalie Chen; Paola Conconi; Carlo Perroni
    Abstract: Bargaining theory suggests that married women who experience a relative improvement in their labour market position should experience a comparative gain within their marriage. However, if renegotiation possibilities are limited by institutional mechanisms that achieve long-term commitment, the opposite may be true, particularly if women are specialized in household activities and the labour market allows comparatively more flexibility in their labour supply responses. Evidence from the German Socio-Economic Panel indeed shows that, as long as renegotiation opportunities are limited, comparatively better wages for women exacerbate their 'double burden' of market and household work.
    Keywords: bargaining, marriage and renegotiation
    JEL: D1 J2 J3
    Date: 2007
  3. By: Simon Luechinger; Alois Stutzer; Rainer Winkelmann
    Abstract: Sorting of people on the labor market not only assures the most productive use of valuable skills but also generates individual utility gains if people experience an optimal match between job characteristics and their preferences. Based on individual data on subjective well-being it is possible to assess these latter gains from matching. We introduce a two-equation ordered probit model with endogenous switching and study self-selection into government and private sector jobs. In an analysis with data from the European Social Survey, we find considerable gains from matching amounting to an increase in the fraction of very satisfied workers from 53.8 to 58.8 percent relative to a hypothetical random allocation of workers to the two sectors. A companion analysis of data from the German Socio-Economic Panel shows that selection on unobservables is reduced once we include additional controls for preference heterogeneity.
    Keywords: Household Taxation, Income Distribution, Work Incentives, Microsimulation
    Date: 2007
  4. By: Richard Layard; Guy Mayraz; Stephen J. Nickell
    Abstract: In normative public economics it is crucial to know how fast the marginal utility of income declines as income increases. One needs this parameter for cost-benefit analysis, for optimal taxation and for the (Atkinson) measurement of inequality. We estimate this parameter using four cross-sectional surveys of subjective well-being and two panel surveys. Altogether, we use data from over 50 countries, and in a period extending from 1972 to 2005. In all six surveys we find a consistent relationship between reported well-being and income. We estimate the elasticity of marginal utility with respect to income at around (minus) 1.26. In the second part of the paper we ask whether true utility may not have a convex relationship to reported happiness, making it less concave with respect to income. We find some evidence of this, so that the elasticity of marginal utility with respect to income may be somewhat lower at roughly (minus) 1.2.
    Keywords: Marginal utility, income, life satisfaction, happiness, public economic, welfare, inequality, optimal taxation, reference-dependent preferences
    JEL: I31 H00 D1 D61 H21
    Date: 2007
  5. By: Luigi Guiso; Paola Sapienza; Luigi Zingales
    Abstract: To explain the extremely long-term persistence (more than 500 years) of positive historical experiences of cooperation (Putnam, 1993), we model the intergenerational transmission of priors about the trustworthiness of others. We show that this transmission tends to be biased toward excessively conservative priors. As a result, societies can be trapped in a low-trust equilibrium. In this context, a temporary shock to the return to trusting can have a permanent effect on the level of trust. We validate the model by testing its predictions on the World Values Survey data and the German Socio Economic Panel. We also present some anecdotal evidence that these priors are reflected in the novels originated in different parts of the country.
    Keywords: social capital, culture, trust
    JEL: A13 N00 O1
    Date: 2007
  6. By: Guido Heineck (University of Erlangen-Nuremberg. Department of Statistics and Empirical Economics)
    Abstract: Religion as a determinant of individuals’ behavior has only recently found its way in the economic literature. In this analysis, four waves of ISSP-data covering the time between 1991 and 2002 are used to examine the relationship between religion and attitudes towards working mothers across (West and East) Germany, Ireland, and the UK. Further, using sub-samples of married individuals, the study addresses whether these attitudes along with religious involvement are related to wives’ labor market participation. Results suggest that religious affiliation and participation correlate positively with traditional attitudes and that those attitudes are negatively associated with female labor participation. Beyond that, religion has only modest additional explaining power.
    Keywords: Attitudes, religion, female labor participation
    JEL: J16 J22 Z12
    Date: 2007–12–19
  7. By: Wang-Sheng Lee (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Umut Oguzoglu (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: The aim of this paper is to estimate in a multivariate context the factors associated with well-being and ill-being without making the assumptions that they are opposite ends of the same continuum, and that the factors uniformly affect both well-being and ill-being. Using the first five waves of panel data from the Household, Income and Labour Dynamics in Australia (HILDA) survey, we jointly model positive and negative well-being in a two-equation dynamic panel data model. We found that while past ill-being had significant effect on current well-being there was no support for a reverse relationship (i.e. lagged effect of well-being on current ill-being). In addition, we also found support for asymmetry in how certain factors affect well-being and ill-being. The implication of the findings in this paper for the happiness literature is that for future empirical work, it would perhaps more prudent to begin with the notion that well-being and ill-being are distinct dimensions, that the unobservables that affect well-being and ill-being are correlated, and to specify econometric models that allow for these concepts to be reflected.
    Date: 2007–10
  8. By: Abhijit V. Banerjee; Esther Duflo
    Abstract: This paper uses household survey data form several developing countries to investigate whether the poor (defined as those living under $1 or $2 dollars a day at PPP) and the non poor have different mortality rates in old age. We construct a proxy measure of longevity, which is the probability that an adult's mother and father are alive. The non-poor's mothers are more likely to be alive than the poor's mothers. Using panel data set for Indonesia and Vietnam, we also find that older adults are significantly more likely to have died five years later if they are poor. The direction of causality is unclear: the poor may be poor because they are sick (and thus more likely to die), or they could die because they are poor.
    JEL: I12 I32 O12 O15
    Date: 2007–12

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