nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2009‒08‒08
seven papers chosen by
Maximo Rossi
University of the Republic

  1. Does Relative Income Matter? : Are the Critics Right? By Richard Layard; Guy Mayraz; Stephen Nickell
  2. Population and Health Policies By T. Paul Schultz
  3. Economics, Area Studies and Human Development By Gustav Ranis
  4. Conditional Cooperation and Social Group - Experimental results from Colombia By Martinsson, Peter; Villegas-Palacio, Clara; Wollbrant, Conny
  5. The evolution of ideology, fairness and redistribution By Alberto Alesina; Guido Cozzi; Noemi Mantovan
  6. Jobless, Friendless, and Broke: What Happens to Different Areas of Life Before and After Unemployment? By Nattavudh Powdthavee; ;
  7. History without Evidence: Latin American Inequality since 1491 By Jeffrey G. Williamson

  1. By: Richard Layard; Guy Mayraz; Stephen Nickell
    Abstract: Do other peoples¿ incomes reduce the happiness which people in advanced countries experience from any given income? And does this help to explain why in the U.S., Germany and some other advanced countries, happiness has been constant for many decades? The answer to both questions is ¿Yes¿. We provide 4 main pieces of evidence. 1) In the U.S. General Survey (repeated samples since 1972) comparator income has a negative effect on happiness equal in magnitude to the positive effect of own income. 2) In the West German Socio-Economic Panel since 1984 the same is true but with life satisfaction as the dependant variable. We also use the Panel to compare the effect of income comparisons and of adaptation as factors explaining the stable level of life-satisfaction: income comparisons emerge as much the more important. 3) When in our U.S. analysis we introduce ¿perceived¿ relative income as a potential explanatory variable, its effect is as large as the effect of actual relative income ¿ further supporting the view that comparisons matter. 4) Finally, for a panel of European countries since 1973 we estimate the effect of average income upon average lifesatisfaction, splitting income into two components: trend and cycle. The effect of trend income is small and illdefined. Our conclusions relate to time series and to advanced countries only. They differ from those drawn in recent studies by Deaton and Stevenson/Wolfers, but those studies are largely cross-sectional and mostly include non-advanced as well as advanced countries.
    Keywords: Easterlin Paradox, happiness, relative income, growth
    JEL: D31 D90 E01 H00 I31 O15
    Date: 2009
  2. By: T. Paul Schultz (Yale University)
    Abstract: The literature evaluating population and health policies is in flux, with many disciplines exploring biological and behavioral linkages from fetal development to chronic disease, disability, and late life mortality. The focus here is on research methods, findings, and questions that economists can clarify regarding the causal relationships between economic development, health outcomes, and reproductive behavior, which operate in many directions. The connection between conditions under which people live and their expected life span and health status refer to “health production functions”. The relationships between an individual’s stock of health and productivity, well being, and life span encompasses the “returns to health human capital”. The control of reproduction improves the well being of women, the economic opportunities of her offspring, and slows population growth. Evaluation of policy interventions is more than a question of technological efficiency, but also involves the behavioral responsiveness of individuals, families, social networks, and communities.
    Keywords: Health, Fertility and Family Planning, Biology of Health Human Capital, Economic Development
    JEL: D13 I18 O12
    Date: 2009–07
  3. By: Gustav Ranis (Yale University, Economic Growth Center)
    Abstract: This paper suggests that area studies and economics have a better chance to be married successfully if we shift our attention from the exclusive emphasis on economic growth towards improvements in human development, especially the much broadened version of that concept. Different areas are shown to differ substantially in terms of the choices they make among the various independent dimensions of well-being and the various indicators within each dimension. The particular characteristics of each area play an important role in determining the choices societies make and the extent to which they are constrained by their initial conditions.
    Keywords: Economics, Human Development, Area Studies
    JEL: O1 O2 O5
    Date: 2009–07
  4. By: Martinsson, Peter (Department of Economics, School of Business, Economics and Law, Göteborg University); Villegas-Palacio, Clara (Department of Economics, School of Business, Economics and Law, Göteborg University); Wollbrant, Conny (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: In contrast to previous studies on cross-group comparisons of conditional cooperation, this study keeps cross- and within-country dimensions constant. The results reveal significantly different cooperation behavior between social groups in the same location.<p>
    Keywords: Conditional cooperation; experiment; public goods; social group
    JEL: C91 H41
    Date: 2009–08–05
  5. By: Alberto Alesina; Guido Cozzi; Noemi Mantovan
    Abstract: Ideas about what is "fair" above and beyond the individuals' position in the income ladder determine preferences for redistribution. We study the dynamic evolution of different economies in which redistributive policies, perception of fairness, inequality and growth are jointly determined. We show how including fairness explains various observed relationship between inequality, redistribution and growth. We also show how different beliefs about fairness can keep two otherwise identical countries in different development paths for a very long time.
    Keywords: Inequality, Fairness, Redistribution, Ideology.
    JEL: D31 E62 H2 P16
    Date: 2009–07
  6. By: Nattavudh Powdthavee; ;
    Abstract: Using a nationally representative longitudinal data of the British people, this paper explores how different areas of a person's life are affected by unemployment. We find evidence that unemployment is preceded, on average, by a year of dissatisfaction with one's finance and job. Once unemployed, the individuals go through a period of financial worries, social isolation, and health loss, as well as fluctuations in marital quality. While the unemployed fully adapt to the drop in health satisfaction, adaptation in other areas of life is less complete. We also find that it makes virtually no difference to the life satisfaction-path before and after unemployment whether one assumes unemployment to affect life satisfaction directly or indirectly via its impacts on different life domains. Finally, the paper discusses the use of instrumented income to estimate the sums required to compensate individuals for each year that they spend in unemployment.
    Keywords: Domain satisfaction; Life satisfaction; Adaptation; Unemployment; Happiness
    JEL: I31 J6
  7. By: Jeffrey G. Williamson (Harvard University and University of Wisconsin)
    Abstract: Most analysts of the modern Latin American economy hold to a pessimistic belief in historical persistence -- they believe that Latin America has always had very high levels of inequality, suggesting it will be hard for modern social policy to create a more egalitarian society. This paper argues that this conclusion is not supported by what little evidence we have. The persistence view is based on an historical literature which has made little or no effort to be comparative. Modern analysts see a more unequal Latin America compared with Asia and the rich post-industrial nations and then assume that this must always have been true. Indeed, some have argued that high inequality appeared very early in the post-conquest Americas, and that this fact supported rent-seeking and anti-growth institutions which help explain the disappointing growth performance we observe there even today. This paper argues to the contrary. Compared with the rest of the world, inequality was not high in pre-conquest 1491, nor was it high in the post-conquest decades following 1492. Indeed, it was not even high in the mid-19th century just prior Latin America’s belle époque. It only became high thereafter. Historical persistence in Latin American inequality is a myth.
    Keywords: Inequality; Development; Latin America
    JEL: N16 N36 O15 D3
    Date: 2009–07–15

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