nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2008‒09‒20
nine papers chosen by
Maximo Rossi
University of the Republic

  1. Why does the amount of income redistribution differ between United States and Europe? The Janus face of Switzerland By Sule Akkoyunlu; Ilja Neustadt; Peter Zweifel
  2. Can Policy Interact with Culture? Minimum Wage and the Quality of Labor Relations By Aghion, Philippe; Algan, Yann; Cahuc, Pierre
  3. Did the Decline in Social Capital Depress Americans’ Happiness? By Stefano Bartolini; Ennio Bilancini; Maurizio Pugno
  4. Inequality and Growth Revisited By Barro, Robert J.
  5. Poverty among Cotton Producers: Evidence from West and Central Africa By Tsimpo, Clarence; Wodon, Quentin
  6. Is there a divergence between objective measures and subjective perceptions of poverty trends? Evidence from West and Central Africa By Wodon, Quentin
  7. Wage Formation between Newly Hired Workers and Employers: Survey Evidence By Robert E. Hall; Alan B. Krueger
  8. The Age Discrimination in Employment Act and the Challenge of Population Aging By David Neumark
  9. International evidence on well-being By David G. Blanchflower

  1. By: Sule Akkoyunlu (Socioeconomic Institute, University of Zurich); Ilja Neustadt (Socioeconomic Institute, University of Zurich); Peter Zweifel (Socioeconomic Institute, University of Zurich)
    Abstract: In this paper, the amount of income redistribution in the United States and the European Union is compared and related to economic, political, and behavioral determinants. Lying in between the two poles, Switzerland provides evidence about the relative merits of competing hypotheses. It tips the balance against economic explanation, which predicts more rather than less income redistribution in the United States compared to the EU. It only weakly supports the political model, which links proportional representation and multiparty structure (which also characterize Switzerland) to redistribution; yet the Swiss share of transfers in the GDP is low. Behavioral explanations receive good deal of support from the case of Switzerland, a country that shares with the United States the belief that hard work rather than luck, birth, connections, and corruption determine wealth. In this way, the Janus face of Switzerland may help to explain the difference in the amount of U.S. and EU income redistribution.
    Keywords: Redistribution, Income Mobility, Political Economy, Beliefs, Reciprocity, Ethnicity
    JEL: D31 D63 D64 H53 I31
    Date: 2008–09
  2. By: Aghion, Philippe (Harvard University); Algan, Yann (Sciences Po, Paris); Cahuc, Pierre (Ecole Polytechnique, Paris)
    Abstract: Can public policy interfere with culture, such as beliefs and norms of cooperation? We investigate his question by evaluating the interactions between the State and the Civil Society, focusing on the labor market. International data shows a negative correlation between union density and the quality of labor relations on one hand, and state regulation of the minimum wage on the other hand. To explain this relation, we develop a model of learning of the quality of labor relations. State regulation crowds out the possibility for workers to experiment negotiation and learn about the true cooperative nature of participants in the labor market. This crowding out effect can give rise to multiple equilibria: a "good" equilibrium characterized by strong beliefs in cooperation, leading to high union density and low state regulation; and a "bad" equilibrium, characterized by distrustful labor relations, low union density and strong state regulation of the minimum wage. We then use surveys on social attitudes and unionization behavior to document the relation between minimum wage legislation and the beliefs about the scope of cooperation in the labor market.
    Keywords: social capital, quality of labor relations, trade unions, minimum wage
    JEL: J30 J50 K00
    Date: 2008–09
  3. By: Stefano Bartolini; Ennio Bilancini; Maurizio Pugno
    Abstract: Most popular explanations cannot fully account for the declining trend of U.S. reported well-being during the last thirty years. We test the hypothesis that the relationship between social capital and happiness at the individual level accounts for what is left unexplained by previous research. We provide three main findings. First, several indicators of social capital are significantly correlated with reported happiness. Second, social capital indicators for the period 1975-2004 show a declining trend. Finally, the trend of happiness can be largely accounted for by the increasing trend of income, the increasing trend of reference income and the declining trend of social capital – in particular by the decline of its relational and non-instrumental components
    Keywords: happiness, social capital, economic growth, relational goods, intrinsic motivations
    JEL: I3 O1
    Date: 2008–08
  4. By: Barro, Robert J. (Harvard University)
    Abstract: This paper updates and extends the work of Barro (2000). International data confirm the presence of the Kuznets curve-an inverse-U shape relationship between income inequality and per capita GDP-that is relatively stable from the 1960s into the 2000s. The direct effect of international openness on income inequality is also found to be positive. On the other hand, a cross-country-growth equation shows a negative effect of income inequality on economic growth, holding fixed a familiar set of other explanatory variables. This effect diminishes as per capita GDP rises and may be positive for the richest countries.
    Keywords: inequality; growth; Kuznets curve; Gini coefficient
    JEL: I31 O47
    Date: 2008–01–01
  5. By: Tsimpo, Clarence; Wodon, Quentin
    Abstract: World cotton prices have been declining in the past decade and farmers in West and Central Africa have been especially hard hit. This has led to heated policy debates and difficult trade-offs for governments, as their desire to help producers is constrained by the need to avoid large subsidies that could lead to important budget deficits and ultimately threaten macro-economic stability and future growth. Using very simple statistical analysis, this short dissemination note shows how newly available household surveys have permitted the estimation of measures of poverty among cotton producers in West and Central Africa, as well as simulations of the impact that changes in producer prices may have on poverty.
    Keywords: cotton; poverty; producer prices; Africa
    JEL: Q12 I32
    Date: 2007–10
  6. By: Wodon, Quentin
    Abstract: Several sub-Saharan African countries have succeeded at increasing their economic growth rate in recent years, and this has translated into substantial poverty reduction according to objective measures based on household survey data. At the same time, many people do not feel that the poverty situation has been improving in their country or community, and this is a source of concern for elected policymakers. To what extent is there a divergence between objective measures and subjective perceptions of poverty trends, and what may explain this divergence? The objective of this short dissemination note is to document and discuss this issue using data from West and Central Africa and results from a series of poverty assessments recently completed at the World Bank.
    Keywords: Poverty; Perceptions; Vulnerability; Social Services; Africa
    JEL: I30
    Date: 2007–10
  7. By: Robert E. Hall; Alan B. Krueger
    Abstract: Some workers bargain with prospective employers before accepting a job. Others could bargain, but find it undesirable, because their right to bargain has induced a sufficiently favorable offer, which they accept. Yet others perceive that they cannot bargain over pay; they regard the posted wage as a take-it-or-leave-it opportunity. Theories of wage formation point to substantial differences in labor-market equilibrium between bargained and posted wages. The fraction of workers hired away from existing jobs is another key determinant of equilibrium, because a worker with an existing job has a better outside option in bargaining than does an unemployed worker. Our survey measures the incidences of wage posting, bargaining, and on-the-job search. We find that about a third of workers had precise information about pay when they first met with their employers, a sign of wage posting. We find that another third bargained over pay before accepting their current jobs. And about 40 percent of workers could have remained on their earlier jobs at the time they accepted their current jobs.
    JEL: E24 J3 J64
    Date: 2008–09
  8. By: David Neumark
    Abstract: This paper reviews evidence on age discrimination in U.S. labor markets and on the effects of the Age Discrimination in Employment Act (ADEA) in combating this discrimination. It focuses on the challenge of population aging facing the U.S. economy in coming decades. Combating age discrimination is likely to help in meeting this challenge by encouraging employment of older individuals. But the paper also explores how rapid aging of the population protected by the ADEA might inhibit the ADEA's effectiveness, and raises questions about possible changes in age discrimination policies and enforcement that could enhance the ability of the ADEA to mitigate some of the adverse consequences of population aging.
    JEL: J14 J71 J78
    Date: 2008–09
  9. By: David G. Blanchflower
    Abstract: National Time Accounting is a way of measuring society's well-being, based on time use. Its explicit form is the U-index, for "unpleasant" or "undesirable", which measures the proportion of time an individual spends in an unpleasant state. In this paper I review cross-country evidence on happiness and life satisfaction and consider whether these data will likely be replaced by the U-index. I find that first, that there are many similarities. According to both measures happiness is higher for the more educated, for married people, for those with higher income and for whites and lower for the unemployed; is U-shaped in age and un-trended over time in the USA although they are trended up in a number of EU countries and especially so in developing countries. Equivalent results are found using self-reported unhappiness data. Second, there is a large body of data on happiness that is unavailable on the U-index. For example, according to happiness research well-being across nations is lower the higher is the unemployment rate, the current inflation rate and the highest inflation rate in a person's adult life. Higher inequality also lowers happiness. Third, we know little about the predictive power of the U-index. Happiness and life satisfaction data seem able to forecast migration flows. Fourth, happy people are particularly optimistic about the future. Fifth, according to the happiness data the US ranks above France but the U-index suggests the reverse.
    JEL: I1 J0
    Date: 2008–09

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