nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2008‒04‒12
six papers chosen by
Maximo Rossi
University of the Republic

  1. The Measurement of Social Polarization in a Multi-group Context By Iñaki Permanyer
  2. Social Capital as Good Culture By Guiso, Luigi; Sapienza, Paola; Zingales, Luigi
  3. The Ins and Outs of European Unemployment By Petrongolo, Barbara; Pissarides, Christopher
  4. Labour Markets and Monetary Policy: A New Keynesian Model with Unemployment By Blanchard, Olivier J; Galí, Jordi
  5. Lost in Transition : Life Satisfaction on the Road to Capitalism By Richard A. Easterlin
  6. Life Satisfaction and Economic Conditions in East and West Germany Pre- and Post-Unification By Richard A. Easterlin; Anke C. Zimmermann

  1. By: Iñaki Permanyer
    Abstract: Polarization indices presented up to now have only focused their attention on the distribution of income/wealth. However, in many circumstances income is not the only relevant dimension that might be the cause of social conflict, so it is very important to have a social polarization index able to cope with alternative dimensions. In this paper we present an axiomatic characterization of one of such indices: it has been obtained as an extension of the (income) polarization measure introduced in Duclos, Esteban and Ray (2004) to a wider domain. It turns out that the axiomatic structure introduced in that paper alone is not appropriate to obtain a fully satisfactory characterization of our measure, so additional axioms are proposed. As a byproduct, we present an alternative axiomatization of the aforementioned income polarization measure.
    Date: 2008–04–07
  2. By: Guiso, Luigi; Sapienza, Paola; Zingales, Luigi
    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 differences in priors across regions are reflected in the spirit of the novels that originate from those regions.
    Keywords: culture; social capital; trust
    JEL: E00 P26 Z1
    Date: 2008–01
  3. By: Petrongolo, Barbara; Pissarides, Christopher
    Abstract: In this paper we study the contribution of inflows and outflows to the dynamics of unemployment in three European countries, the United Kingdom, France and Spain. We compare performance in these three countries making use of both administrative and labour force survey data. We find that the impact of the 1980s reforms in Britain is evident in the contributions of the inflow and outflow rates. The inflow rate became a bigger contributor after the mid 1980s, although its significance subsided again in the late 1990s and 2000s. In France the dynamics of employment are driven virtually entirely by the outflow rate, which is consistent with a regime with strict employment protection legislation. In Spain, however, both rates contribute significantly to the dynamics, very likely as a consequence of the prominence of fixed-term contracts since the late 1980s.
    Keywords: Job finding rates; Job separation rates; Unemployment dynamics
    JEL: E24 E32 J6
    Date: 2008–02
  4. By: Blanchard, Olivier J; Galí, Jordi
    Abstract: We construct a utility-based model of fluctuations, with nominal rigidities and unemployment, and draw its implications for the unemployment-inflation trade-off and for the conduct of monetary policy. We proceed in two steps. We first leave nominal rigidities aside. We show that, under a standard utility specification, productivity shocks have no effect on unemployment in the constrained efficient allocation. We then focus on the implications of alternative real wage setting mechanisms for fluctuations in unemployment. We show the role of labour market frictions and real wage rigidities in determining the effects of productivity shocks on unemployment. We then introduce nominal rigidities in the form of staggered price setting by firms. We derive the relation between inflation and unemployment and discuss how it is influenced by the presence of labour market frictions and real wage rigidities. We show the nature of the trade-off between inflation and unemployment stabilization, and its dependence on labour market characteristics. We draw the implications for optimal monetary policy.
    Keywords: Labour market frictions; New Keynesian Model; real wage rigidities; search model; sticky prices; unemployment
    JEL: E32 E50
    Date: 2008–03
  5. By: Richard A. Easterlin
    Abstract: In the transition from socialism to capitalism in Eastern Europe life satisfaction has followed the V-shaped pattern of GDP but failed to recover commensurately. In general, increased satisfaction with material living levels has occurred at the expense of decreased satisfaction with work, health, and family life. Disparities in life satisfaction have increased markedly with those hardest hit being the less educated and persons over age 30; women and men have suffered about equally. The asymmetric response of life satisfaction to decreases in GDP in transition countries and increases in GDP in non-transition countries is arguably due to loss aversion.
    Keywords: Happiness, transition, capitalism, socialism, loss aversion
    JEL: I31 P5 P27 D60
    Date: 2008
  6. By: Richard A. Easterlin; Anke C. Zimmermann
    Abstract: Economic disruption in East Germany at the time of unification resulted in a noticeable drop in life satisfaction. By the late 1990s East Germany's life satisfaction had recovered to about its 1990 level, and its shortfall relative to West Germany was slightly less than that before unification. In West Germany life satisfaction was fairly constant before unification, but subsequently trended moderately downward, with Turkish life satisfaction declining noticeably relative to Germans. Changes in life satisfaction in East and West Germany both for Germans and foreigners are most closely associated with relative income variables, not absolute income.
    Keywords: Life satisfaction, happiness, relative income, income satisfaction, transition economies
    JEL: D31 D60 I31 O52 P3
    Date: 2008

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