nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2010‒01‒23
fourteen papers chosen by
Maximo Rossi
University of the Republic

  1. Health Care Expenditure and Income in the OECD Reconsidered: Evidence from Panel Data By Badi H. Baltagi; Francesco Moscone
  2. Obesity and Happiness By Marina-Selini Katsaiti
  3. Determinants of Health Disparities in Italian Regions By Luisa Franzini; Margherita Giannoni
  4. Income Support Systems, Labor Market Policies and Labor Supply: The German Experience By Caliendo, Marco
  5. Policies to Create and Destroy Human Capital in Europe By Heckman, James J.; Jacobs, Bas
  6. Cultural Integration in Germany By Constant, Amelie F.; Nottmeyer, Olga; Zimmermann, Klaus F.
  7. Years of Schooling, Human Capital and the Body Mass Index of European Females By Brunello, Giorgio; Fabbri, Daniele; Fort, Margherita
  8. Welfare Rankings From Multivariate Data, A Non-Parametric Approach By Gordon Anderson; Ian Crawford; Andrew Leicester
  9. Making Inferences About Rich Country - Poor Country Convergence: The Polarization Trapezoid and Overlap measures. By Gordon Anderson; Teng Wah Leo; Oliver Linton
  10. Self-delusion in the pursuit of happiness By Dag Einar Sommervoll
  11. "In every rank, or great or small, ’Tis industry supports us all": Romanians and ethnic Hungarians, and their wages, in transition By Andrén, Daniela
  12. The Effect of Protestantism on Education before the Industrialization: Evidence from 1816 Prussia By Becker, Sascha O.; Woessmann, Ludger
  13. On the relation between income inequality and happiness: Do fairness perceptions matter? By Bjørnskov, Christian; Dreher, Axel; Fischer, Justina A. V.; Schnellenbach, Jan
  14. Inequality in health outcomes in India: the role of caste and religion By Borooah, Vani /K

  1. By: Badi H. Baltagi (Center for Policy Research, Maxwell School, Syracuse University, Syracuse, NY 13244-1020); Francesco Moscone
    Abstract: This paper reconsiders the long-run economic relationship between health care expenditure and income using a panel of 20 OECD countries observed over the period 1971-2004. In particular, the paper studies the non-stationarity and cointegration properties between health care spending and income. This is done in a panel data context controlling for both cross-section dependence and unobserved heterogeneity. Cross-section dependence is modelled through a common factor model and through spatial dependence. Heterogeneity is handled through fixed effects in a panel homogeneous model and through a panel heterogeneous model. Our findings suggest that health care is a necessity rather than a luxury, with an elasticity much smaller than that estimated in previous studies.
    Keywords: Health expenditure, income elasticity, cross section dependence, heterogeneous panels, factor models
    JEL: C31 C33 H51
    Date: 2010–01
  2. By: Marina-Selini Katsaiti (University of Connecticut and University of Athens)
    Abstract: This paper provides insight on the relationship between obesity and happiness. Using the latest available cross sectional data from Germany (GSOEP 2006), UK (BHPS 2005), and Australia (HILDA 2007). We examine whether there is evidence on the impact of overweight on subjective well being. The Hausman test is employed in the univariate and multivariate specifications chosen and reveals evidence for the presence of endogeneity in the German and the Australian data. Instrumental variable analysis is performed under the presence of endogeneity whereas for the UK we run OLS regressions. Results indicate that in all three countries obesity has a negative and significant effect on the subjective well being of individuals. For Germany, using a differences-in-differences methodology, I find that non-overweight/non-obese individuals are on average 0.5 units happier than their overweight/obese counterparts. My findings also have important implications for the effect of other socio-demographic, economic and individual characteristics on well being.
    Keywords: Happiness, Obesity, Instrumental Variable Analysis, Subjective Well Being
    JEL: D60 I31
    Date: 2009–10
  3. By: Luisa Franzini; Margherita Giannoni
    Abstract: There is an extensive literature on regional disparities in health, but much of thisliterature focuses on the United States. Among European countries, Italy is the country whereregional health disparities contribute the most to socioeconomic health disparities. In this paper,we report on regional differences in self-reported poor health and explore possible determinantsat the individual and regional levels in Italy. We use data from the “Indagine Multiscopo sulle Famiglie”, a survey of aspects ofeveryday life in the Italian population, to estimate multilevel logistic regressions that model poorself-reported health as a function of individual and regional socioeconomic factors. Next we usethe causal step approach to test if living conditions, healthcare characteristics, social isolation,2and health behaviors at the regional level mediate the relationship between regionalsocioeconomic factors and self-rated health. We find that residents living in regions with more poverty, more unemployment, andmore income inequality are more likely to report poor health and that poor living conditions andprivate share of healthcare expenditures at the regional level are determinants of socioeconomicdisparities in self-rated health among Italian regions. The implications are that regional contexts matter and that regional policies in Italyhave the potential to reduce health disparities by implementing interventions aimed at improvingliving conditions and access to quality healthcare.
    Keywords: health inequality, Italy, self-reported health, regional health disparities
    JEL: I10 I12 D10
    Date: 2009–10–20
  4. By: Caliendo, Marco (IZA)
    Abstract: In view of the demographic trends, most EU countries face the problem of a declining work force in the future. Understanding the interaction between income support systems (such as unemployment benefits, social assistance, early retirement and pension systems) and total labor supply is of crucial importance to combat problems and ensure economic growth in the future. The German labor market has been plagued by high and persistent unemployment in the last two decades in combination with a relatively low labor force participation of women. This created a situation where labor market reforms were unavoidable. The speed and depth of the reforms are remarkable, mainly aimed at activating people by increasing their incentives to take up work. The aim of this paper is to give a brief overview of the German income support systems and labor market polices, their recent reforms and – where already possible – effects of these reforms. Overall, Germany seems to be on the right track. The recent reforms helped to tackle some labor market problems but also created high political unrest. It remains to be seen how future governments react to worsened economic conditions in light of these experiences.
    Keywords: unemployment, labor force participation, labor supply, benefit systems, public policy
    JEL: J26 J38 J68
    Date: 2009–12
  5. By: Heckman, James J. (University of Chicago); Jacobs, Bas (Erasmus University Rotterdam)
    Abstract: Trends in skill bias and greater turbulence in modern labor markets put wages and employment prospects of unskilled workers under pressure. Weak incentives to utilize and maintain skills over the life-cycle become manifest with the ageing of the population. Reinvention of human capital policies is required to avoid increasing welfare state dependency among the unskilled and to reduce inefficiencies in human capital formation. Policy makers should acknowledge strong dynamic complementarities in skill formation. Investments in the human capital of children should expand relative to investment in older workers. There is no trade-off between equity and efficiency at early ages of human development but there is a substantial trade-off at later ages. Later remediation of skill deficits acquired in early years is often ineffective. Active labor market and training policies should therefore be reformulated. Skill formation is impaired when the returns to skill formation are low due to low skill use and insufficient skill maintenance later on in life. High marginal tax rates and generous benefit systems reduce labor force participation rates and hours worked and thereby lower the utilization rate of human capital. Tax-benefit systems should be reconsidered as they increasingly redistribute resources from outsiders to insiders in labor markets which is both distortionary and inequitable. Early retirement and pension schemes should be made actuarially fairer as they entail strong incentives to retire early and human capital is thus written off too quickly.
    Keywords: family policy, (non)cognitive skills, returns to education, inequality, dynamic complementarity, training, retirement, labor supply, human capital, skill formation, training policy, active labor market policy, tax, pension, benefit systems, welfare state
    JEL: H2 H5 I2 I3 J2 J3
    Date: 2009–12
  6. By: Constant, Amelie F. (DIW DC, George Washington University); Nottmeyer, Olga (DIW Berlin); Zimmermann, Klaus F. (IZA, DIW Berlin and Bonn University)
    Abstract: This chapter investigates the integration processes of immigrants in Germany by comparing certain immigrant groups to natives differentiating by gender and immigrant generation. Indicators which are supposed to capture cultural integration of immigrants are differences in marital behavior as well as language abilities, ethnic identification and religious distribution. A special feature of the available data is information about overall life satisfaction, risk aversion and political interest. These indicators are also presented. All of these indicators are depicted in comparison between natives and immigrants differentiated by ethnic origin, gender and generation. This allows visualization of differences by ethnic groups and development over time. Statements about the cultural integration processes of immigrants are thus possible. Furthermore, economic integration in terms of female labor force participation is presented as an additional feature. Empirical findings suggest that differences among immigrants and between immigrants and Germans do exist and differ significantly by ethnic origin, gender and generation. But differences seem to diminish when we consider the second generations. This indicates greater adaptation to German norms and habits, and thus better cultural, socio-economic and political integration of second generation immigrants in Germany.
    Keywords: cultural integration, immigrants, Germany, ethnic origin, gender, generation
    JEL: F22 J15 J61 Z13
    Date: 2009–12
  7. By: Brunello, Giorgio (University of Padova); Fabbri, Daniele (University of Bologna); Fort, Margherita (University of Bologna)
    Abstract: We use the compulsory school reforms implemented in European countries after the II World War to investigate the causal effect of education on the Body Mass Index (BMI) and the incidence of overweight and obesity among European females. Our IV estimates suggest that years of schooling have a protective effect on BMI. The size of the estimated effect is not negligible but smaller than the one found in comparable recent work for the US. We depart from the current empirical literature in three main directions. First, we use a multi-country approach. Second, we complement the standard analysis of the causal impact of years of schooling on BMI with one relying on a broader measure of education, i.e. individual standardized cognitive tests, and show that the current focus in the literature on years of schooling as the measure of education is not misplaced. Last, we evaluate whether the current focus on conditional mean effects should be integrated with an approach which allows for heterogeneous responses to changes in compulsory education. Although our evidence based on quantile regressions is mixed, there is some indication that the protective effect of schooling does not increase monotonically from the lower to the upper quantile of the distribution of BMI. Rather, the marginal effect is stronger among overweight (but not obese) females than among females with BMI above 30.
    Keywords: obesity, human capital, Europe
    JEL: I12 I21
    Date: 2009–12
  8. By: Gordon Anderson; Ian Crawford; Andrew Leicester
    Abstract: Economic and Social Welfare is inherently multidimensional. However choosing a measure which combines several indicators is difficult and may have unintended and undesireable effects on the incentives for policymakers. We develope a nonparametric empirical method for deriving welfare rankings based on data envelopment which avoids the need to specify a weighting scheme. The results are valid for all possible social welfare functions which share certain cannonical properties. We apply this method to data on human development.
    Keywords: Welfare Rankings, Data Envelopment, Human development
    JEL: I3
    Date: 2010–01–14
  9. By: Gordon Anderson; Teng Wah Leo; Oliver Linton
    Abstract: Underlying the unresolved debate over whether the gap between rich and poor country GNP per capita has narrowed is a concern for wellbeing. The issue is really about the changing shapes of distributions of wellbeing indicators. As limiting cases con- vergence between rich and poor country groups can be brought about by countries within groups becoming less alike without any diminution of growth rate differentials between them or it can be brought about by reductions in these differentials without any diminution of within group identity. In essence the debate is about the extent to which rich and poor countries are polarizing, a subject first theoretically explored by Esteban and Ray (1994). The empirical issue is about whether separate groups can be identified in the overall distribution and whether they are tending toward common or distinct equilibria. This paper proposes two simple statistics for the problem, the Overlap measure and the Trapezoidal measure, changes in which reflect a combination of increasing (decreasing) subgroup location differences and decreasing (increasing) subgroup spreads which are the characteristics of polarization (convergence). The former statistic is of use when the sub-distributions are identified, while the latter can be used whether or not the subgroups are identified. These techniques are applied to the examination of convergence in GDP per capita between rich and poor nations when growth is viewed either as a wellbeing index or a technology index (i.e. the data are, or are not, population weighted). It turns out that such a distinction matters, viewed technologically there is divergence, viewed in a wellbeing sense there is convergence. As a collection of countries Africa is diverging from the rest of the world whatever the perspective of growth.
    Keywords: Convergence, Polarization, Trapezoid Measure, Overlap measure
    JEL: I3
    Date: 2010–01–14
  10. By: Dag Einar Sommervoll (Statistics Norway)
    Abstract: The paper explores how repeated revisions of consumption plans increase long-run utility. If agents value present anticipations of future consumption, some revisions may be viewed as a benign form of self-delusion. We consider a minimal generalization of the Samuelson discounted utility model to allow for utility linked to next period consumption. Agents are assumed to vary with respect to their sophistication. Different environments likely to facilitate repeated revisions are also considered.
    Keywords: Intertemporalchoice;selfdelusion;timeinconsistency;naivete;self-con trol;discountedutilityfunctions;anticipation;memory
    JEL: A12 B49 C70 D11 D60 D74 D91 E21
    Date: 2010–01
  11. By: Andrén, Daniela (Department of Business, Economics, Statistics and Informatics)
    Abstract: Legally binding treaties or memorandums have been used over time to regulate the issue of national borders of many European countries. As a result, relatively large groups of people have become ethnic minorities in other countries. They may conserve their ethnic identities, and therefore their children may accumulate ethnic human capital (e.g., language, culture, and religion) in addition to the general human capital of the country. Therefore, they can get access to an appropriate occupation linked by tradition or other factors to their ethnic group. This paper uses estimates from a selection model with an endogenous switch among three broad types of occupational groups to analyze the composition of the wage gap between Romanians and ethnic Hungarians in Romania before and during the transition from a planned to a market economy. The results suggest that the institutional settings of the controlled economy allowed Romanians to work in occupations that gave them the best returns, while the changes during the transition years allowed ethnic Hungarians to work in occupations that gave them the best returns.
    Keywords: ethnic wage gap; occupation; selection model with an endogenous switch; wage gap decomposition
    JEL: J31 J38 J39 J71 P27
    Date: 2010–01–15
  12. By: Becker, Sascha O.; Woessmann, Ludger
    Abstract: This paper uses recently discovered data on nearly 300 Prussian counties in 1816 to show that Protestantism led to more schools and higher school enrollment already before the industrialization. This evidence supports the human capital theory of Protestant economic history of Becker and Woessmann (2009), where Protestantism first led to better education, which in turn facilitated industrial development. It rules out that the existing end-of-19th-century evidence can be explained by a Weberian explanation, where a Protestant work ethic first led to industrialization which then increased the demand for education.
    Keywords: Pre-Industrialization; Protestantism; Education
    Date: 2010–01
  13. By: Bjørnskov, Christian; Dreher, Axel; Fischer, Justina A. V.; Schnellenbach, Jan
    Abstract: In this paper, we revisit the association between happiness and inequality. We argue that the perceived fairness of the income generation process affects this association. Building on a two-period model of individual life-time utility maximization, we predict that persons with higher perceived fairness will experience higher levels of life-time utility and are less in favor of income redistribution. In societies with a high level of actual social mobility, income inequality is perceived more positively with increased expected fairness. The opposite is expected for countries with low actual social mobility, due to an increasing relevance of a disappointment effect resulting from unsuccessful individual investments. Using the World Values Survey data and a broad set of fairness measures, we find strong support for the negative (positive) association between fairness perceptions and the demand for more equal incomes (subjective well-being). We also find strong empirical support for the disappointment effect in low social mobility countries. In contrast, the results for high-mobility countries turn out to be ambiguous.
    Keywords: Happiness; life satisfaction; subjective well-being ; inequality; income distribution; redistribution; political ideology; justice; fairness
    JEL: I31 H40 D31 J62 Z13
    Date: 2010–01–15
  14. By: Borooah, Vani /K
    Abstract: The “social gradient to health” - whereby people belonging to groups higher up the social ladder had better health outcomes than those belonging to groups further down - is essentially a Western construct; there has been very little investigation into whether, in developing countries also, people’s state of health is dependent on their social status. The purpose of this paper is to evaluate the relative strengths of economic and social status in determining the health status of persons in India. In other words, even after controlling for non-community factors, did the fact that Indians belonged to different social groups, encapsulating different degrees of social status, exercise a significant influence on the state of their health? The existence of a social group effect would suggest that there was a “social gradient” to health outcomes in India. Furthermore, there was the possibility that the “social gradient” existed with respect to some outcomes but not to others. In investigating this, the paper addresses, in the Indian context, an issue which les at the heart of social epidemiology: estimating the relative strengths of individual and social factors in determining health outcomes.
    Keywords: Health outcomes; Caste; Religion; India
    JEL: I12
    Date: 2010

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