nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2009‒10‒03
four papers chosen by
Maximo Rossi
University of the Republic

  1. Children, happiness and taxation By Leonardo Becchetti; Elena Giachin Ricca; Alessandra Pelloni
  2. Diversity of Communities and Economic Development By Gustav Ranis
  3. Do poorer countries have less capacity for redistribution ? By Ravallion, Martin
  4. The dynamics of social assistance benefit receipt in Britain By Jenkins S; Cappellari L

  1. By: Leonardo Becchetti (University of Rome Tor Vergata); Elena Giachin Ricca (University of Rome Tor Vergata); Alessandra Pelloni (University of Rome Tor Vergata)
    Abstract: Empirical analyses on the determinants of life satisfaction often include the impact of the number of children variable among available controls without fully discriminating between the two (socio- relational and pecuniary) components. In our empirical analysis on the German Socioeconomic Panel we show that, when introducing household income without correction for the number of members, the pecuniary effect prevails and the sign is negative while, when we equivalise income with the most commonly adopted equivalence scales, the non pecuniary (socio-relational) effect emerges and the impact of the variable is positive and significant above a minimal scale elasticity threshold. We further reject slope homogeneity and show that the positive relational effect is stronger for males, below median income households and East Germans. We interpret these subsample split results as driven by heterogeneous opportunity costs. Our empirical results give rise to a paradox: why people have children if the aggregate effect on life satisfaction is negative? We provide in the paper some interpretations consistent with our findings. Some of them are based on motivational complexity. This implies that demographic policies and the paradox are strictly connected. Effectiveness of tax/subsidies impacting on fertility crucially depends on whether the children paradox may be solved within the self-interested rationality paradigm.
    Keywords: equivalised income, scale elasticities, life satisfaction
    JEL: A13 D61 D10 J17
    Date: 2009–09
  2. By: Gustav Ranis (Yale University, Economic Growth Center)
    Abstract: Template-Type: ReDIF-Paper 1.0
    Abstract: This paper reviews the literature on the impact of ethnic diversity on economic development. Ethnically polarized societies are less likely to agree on the provision of public goods and more likely to engage in rent seeking activities providing lower levels of social capital. Initial conditions are important determinants of adverse development outcomes. The role of decentralization, democracy and markets as potential remedies are discussed. The paper then presents a number of preliminary hypotheses on the relationship between diversity and instability in order to stimulate future research.
    Keywords: Africa, Diversity, Economic Growth, Instability
    JEL: O11 O40 O43 O55
    Date: 2009–09
  3. By: Ravallion, Martin
    Abstract: Development aid and policy discussions often assume that poorer countries have less internal capacity for redistribution in favor of their poorest citizens. The assumption is tested using data for 90 developing countries. The capacity for redistribution is measured by the marginal tax rate on those who are not poor by rich-country standards that is needed to cover the poverty gap or to provide a poverty-level of basic income, judged by developing-country standards. For most (but not all) countries with annual consumption per capita under $2,000 (at 2005 purchasing power parity) the required tax burdens are found to be prohibitive-often calling for marginal tax rates of 100 percent or more. By contrast, the required tax rates are quite low (1 percent on average) among all countries with consumption per capita over $4,000, as well as some poorer countries. Most countries fall into one of two groups: those with little or no realistic prospect of addressing extreme poverty through redistribution from the"rich"and those that would appear to have ample scope for such redistribution. Economic growth tends to move countries from the first group to the second. Thus the appropriate balance between growth and redistribution strategies can be seen to depend on the level economic development.
    Keywords: Achieving Shared Growth,Rural Poverty Reduction,Population Policies,Debt Markets,Inequality
    Date: 2009–09–01
  4. By: Jenkins S (Institute for Social and Economic Research); Cappellari L (Department of Economics, Università Cattolica di Milano)
    Abstract: We analyze the dynamics of social assistance benefit (SA) receipt among working-age adults in Britain between 1991 and 2005. The decline in the annual SA receipt rate was driven by a decline in the SA entry rate, rather than by the SA exit rate (which actually declined too). We examine the determinants of these trends using a multivariate dynamic random effects probit model of SA entry and exit probabilities applied to British Household Panel Survey data. The model estimates and accompanying counterfactual simulations highlight the importance of two factors – the decline in the unemployment rate over the period, and other changes in the socioeconomic environment including two reforms to the income maintenance system in the 1990s. The results also reveal a substantial heterogeneity in SA annual transition rates.
    Date: 2009–09–22

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