nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2010‒02‒13
twelve papers chosen by
Maximo Rossi
University of the Republic

  1. Pro-Poor Tax Reforms, with an Application to Mexico By Jean-Yves Duclos; Paul Makdissi; Abdelkrim Araar
  2. Testing for Mobility Dominance By Yélé Maweki Batana; Jean-Yves Duclos
  3. Property Rights, Standards of Living, and Economic Growth: Western Canadian Cree By Ann Carlos; Frank Lewis
  4. Family Job Search, Wage Bargaining, and Optimal Unemployment Insurance By Ek, Susanne; Holmlund, Bertil
  5. Inequality Aversion and Risk Attitudes By Ferrer-i-Carbonell, Ada; Ramos, Xavi
  6. Objective Confirmation of Subjective Measures of Human Well-being: Evidence from the USA By Oswald, Andrew J.; Wu, Stephen
  7. Youth Unemployment: Déjà Vu? By Bell, David N.F.; Blanchflower, David G.
  8. Youth Employment in Europe: Institutions and Social Capital Explain Better than Mainstream Economics By Contini, Bruno
  9. Screening, Competition, and Job Design: Economic Origins of Good Jobs By Bartling, Björn; Fehr, Ernst; Schmidt, Klaus M.
  10. Divorced Fathers' Proximity and Children's Long Run Outcomes: Evidence from Norwegian Registry Data By Kalil, Ariel; Mogstad, Magne; Rege, Mari; Votruba, Mark
  11. Mental Health and Working Conditions in European Countries By Cottini, Elena; Lucifora, Claudio
  12. Wage Inequality and the Changing Organization of Work By Dennis Görlich; Dennis Snower

  1. By: Jean-Yves Duclos; Paul Makdissi; Abdelkrim Araar
    Abstract: This paper proposes a methodology for testing for whether tax reforms are pro-poor. This is done by extending stochastic dominance techniques to help identify tax reforms that will necessarily be deemed absolutely or relatively pro-poor by a wide spectrum of poverty analysts. The statistical properties of the various estimators are also derived in order to make the method implementable using survey data. The methodology is used to assess the pro-poorness of possible reforms to Mexico’s indirect tax system. This leads to the identification of several possible pro-poor tax reforms in that country. It also shows how the pro-poorness of a tax reform depends on one’s conception of poverty as well as on the revenue and efficiency impact of the reform.
    Keywords: Stochastic dominance, pro-poor changes, tax reforms, Mexico
    JEL: D12 D63 H21 I32
    Date: 2010
  2. By: Yélé Maweki Batana; Jean-Yves Duclos
    Abstract: This paper proposes tests for stochastic dominance in mobility based on the empirical likelihood ratio. Two views of mobility are considered, either based on measures of absolute mobility or on transition matrices. First-order and second-order dominance conditions in mobility are first derived, followed by the derivation of statistical inferences techniques to test a null hypothesis of non dominance against an alternative of mobility dominance. An empirical analysis, based on the US Panel Study of Income Dynamics (PSID), is performed by comparing four income mobility periods ranging from 1970 to 1990.
    Keywords: Mobility, Stochastic dominance, Transition matrices, Empirical Likelihood ratio, Bootstrap tests
    JEL: C10 C12 C13 D31 J60
    Date: 2010
  3. By: Ann Carlos (University of Colorado, Boulder); Frank Lewis (Queen's University)
    Abstract: The Great Divergence in standards of living for populations around the world occurred in the late 18th century. Prior to that date evidence suggests that real wages of most Europeans, many living in China and India were similar. Some a little higher and some a little lower but with a low dispersion. By the middle of the 19th century, a divergence had occurred with western Europe pulling away from other groups. Little is known about the standards of living of the aboriginal peoples of North America many of whom were primarily hunter/gatherer’s at the end of the 18th century. Based on comparisons of expenditure, we show that the standard of living of aboriginal people in 1740 was similar to that of wage workers in London. However, within the next century, there would be a great divergence. This paper explores the ways in which hunter-gatherer lifeways and the concomitant property rights structures reduced the likelihood that native economy could experience modern rates of economic growth. Native society and property rights structures which provided a relatively high standard of living in the mid eighteenth century and for part of the nineteenth was unable to provide avenues for further development.
    Keywords: native americans, living standards, property rights
    JEL: N51 N31 I31
    Date: 2010–01
  4. By: Ek, Susanne (Uppsala University); Holmlund, Bertil (Uppsala University)
    Abstract: The paper develops an equilibrium search and matching model where two-person families as well as singles participate in the labor market. We show that equilibrium entails wage dispersion among equally productive risk-averse workers. Marital status as well as spousal labor market status matter for wage outcomes. In general, employed members of two-person families receive higher wages than employed singles. The model is applied to a welfare analysis of alternative unemployment insurance systems, recognizing the role of spousal employment as a partial substitute for public insurance. The optimal system involves benefit differentiation based on marital status as well as spousal labor market status. Optimal differentiation yields small welfare gains but gives rise to large wage differentials.
    Keywords: job search, wage bargaining, wage differentials, unemployment, unemployment insurance
    JEL: J31 J64 J65
    Date: 2010–01
  5. By: Ferrer-i-Carbonell, Ada (IAE Barcelona (CSIC)); Ramos, Xavi (Universitat Autònoma de Barcelona)
    Abstract: Using self reported measures of life satisfaction and risk attitudes, we empirically test whether there is a relationship between individuals inequality and risk aversion. The empirical analysis uses the German SOEP household panel for the years 1997 to 2007 to conclude that the negative effect of inequality measured by the sample gini coefficient by year and federal state is larger for those individuals who report to be less willing to take risks. Nevertheless, the empirical results suggest that even though inequality and risk aversion are related, they are not the same thing. The paper shows that the relationship between risk attitudes and inequality aversion survives the inclusion of individual characteristics (i.e. income, education, and gender) that may be correlated with both risk attitudes and inequality aversion.
    Keywords: happiness, inequality aversion, risk attitudes, well-being
    JEL: D3 D63 I31
    Date: 2010–01
  6. By: Oswald, Andrew J. (University of Warwick); Wu, Stephen (Hamilton College)
    Abstract: A huge research literature, across the behavioral and social sciences, uses information on individuals' subjective well-being. These are responses to questions – asked by survey interviewers or medical personnel – such as "how happy do you feel on a scale from 1 to 4?" Yet there is little scientific evidence that such data are meaningful. This study examines a 2005-2008 Behavioral Risk Factor Surveillance System random sample of 1.3 million United States citizens. Life-satisfaction in each U.S. state is measured. Across America, people's answers trace out the same pattern of quality of life as previously estimated, using solely non-subjective data, in a literature from economics (so-called 'compensating differentials' neoclassical theory due originally to Adam Smith). There is a state-by-state match (r = 0.6, p < 0.001) between subjective and objective well-being. This result has some potential to help to unify disciplines.
    Keywords: compensating differentials, well-being, happiness, spatial equilibrium
    JEL: I31
    Date: 2010–01
  7. By: Bell, David N.F. (University of Stirling); Blanchflower, David G. (Dartmouth College)
    Abstract: This paper reviews current issues in youth labour markets in developed countries. It argues that young people aged 16-25 have been particularly hard hit during the current recession. Using the USA and UK as cast studies, it analyses both causes and effects of youth unemployment using micro-data. It argues that there is convincing evidence that the young are particularly susceptible to the negative effects of spells of unemployment well after their initial experience of worklessness. Because the current youth cohort is relatively large, the longer-term outlook for youth unemployment is quite good, but there is a strong case for policy intervention now to address the difficulties that the current cohort is having in finding access to work.
    Keywords: youth unemployment, scarring, ethnic crime, health, life satisfaction, wages, ALMP
    JEL: J01 J11 J21 J23 J38 J64
    Date: 2010–01
  8. By: Contini, Bruno (LABORatorio R. Revelli)
    Abstract: Why did employment growth – high in the last decade – take place at the expense of young workers in the countries of Central and Southern Europe? This is the question addressed in this paper. Youth unemployment has approached or exceeded 20% despite a variety of factors, common to most EU countries. According to neo-classical economics all would be expected to exert a positive impact on its evolution: population ageing and the demographic decline, low labor cost of young workers, flexibility of working arrangements, higher educational attainment, low unionization of young workers, early retirement practices of workers 50+. But neither seems to provide a convincing explanation. Historically based institutions and political tradition, cultural values, social capital – factors that go beyond the standard explanation of economic theory – provide a more satisfying interpretation.
    Keywords: youth employment, unemployment, social capital, institutions
    JEL: J0 J1 J6
    Date: 2010–01
  9. By: Bartling, Björn (University of Zurich); Fehr, Ernst (University of Zurich); Schmidt, Klaus M. (University of Munich)
    Abstract: In recent decades, many firms offered more discretion to their employees, often increasing the productivity of effort but also leaving more opportunities for shirking. These "high-performance work systems" are difficult to understand in terms of standard moral hazard models. We show experimentally that complementarities between high effort discretion, rent-sharing, screening opportunities, and competition are important driving forces behind these new forms of work organization. We document in particular the endogenous emergence of two fundamentally distinct types of employment strategies. Employers either implement a control strategy, which consists of low effort discretion and little or no rent-sharing, or they implement a trust strategy, which stipulates high effort discretion and substantial rent-sharing. If employers cannot screen employees, the control strategy prevails, while the possibility of screening renders the trust strategy profitable. The introduction of competition substantially fosters the trust strategy, reduces market segmentation, and leads to large welfare gains for both employers and employees.
    Keywords: job design, high-performance work systems, screening, reputation, competition, trust, control, social preferences, complementarities
    JEL: C91 D86
    Date: 2010–01
  10. By: Kalil, Ariel (University of Chicago); Mogstad, Magne (Statistics Norway); Rege, Mari (University of Stavanger); Votruba, Mark (Case Western Reserve University)
    Abstract: This study examines the link between divorced nonresident fathers' proximity and children's long-run outcomes using high-quality data from Norwegian population registers. We follow (from birth to young adulthood) 15,992 children born into married households in Norway in the years 1975-1979 whose parents divorce during his or her childhood. We observe the proximity of the child to his or her father in each year following the divorce and link proximity to children's educational and economic outcomes in young adulthood, controlling for a wide range of observable characteristics of the parents and the child. Our results show that closer proximity to the father following a divorce has, on average, a modest negative association with offspring's young-adult outcomes. The negative associations are stronger among children of highly-educated fathers. Complementary Norwegian survey data show that highly-educated fathers report more post-divorce conflict with their ex-wives as well as more contact with their children (measured in terms of the number of nights that the child spends at the fathers' house). Consequently, the father's relocation to a more distant location following the divorce may shelter the child from disruptions in the structure of the child's life as they split time between households and/or from post-divorce interparental conflict.
    Keywords: fathers' proximity, divorce, child development, long-run outcomes, relocation
    JEL: J12 J13
    Date: 2010–01
  11. By: Cottini, Elena (University of Milan); Lucifora, Claudio (Università Cattolica del Sacro Cuore)
    Abstract: Increased pressure for labour market flexibility and increasing demand over workers' performance have fostered the idea that working conditions, in most European countries, have progressively deteriorated with adverse effects on psychological well being and mental health. This paper investigates the links between contractual arrangements, working conditions and mental health using time-series cross-section data for 15 European countries. We use different waves of the European Working Conditions Survey (1995, 2000, 2005) to document recent patterns in mental health at the workplace and to assess how these are related to various job attributes. We find substantial heterogeneity in mental health incidence at the workplace both across workers, as well as between countries. Given population heterogeneity in responses to mental health questions, we implement a methodology for differential reporting in ordered response models which allows for threshold shifts. We show that a set of workplace attributes, such as: working in shifts, performing complex and intensive tasks and having restricted job autonomy lead to a higher probability of reporting mental health problems. We also provide evidence of a positive causal effect of adverse overall working conditions on mental health distress. We show that labour market institutions, and health and safety regulations can explain a significant part of cross-country differences.
    Keywords: working conditions, mental health, health and safety regulation, labour market institutions
    JEL: C25 I10 J81 J28
    Date: 2010–01
  12. By: Dennis Görlich; Dennis Snower
    Abstract: This paper sheds light on how changes in the organization of work lead to wage inequality. We present a theoretical model in which workers with a wider span of competence (higher level of multitasking) earn a wage premium. Since abilities and opportunities to expand the span of competence are distributed unequally among workers across and within education groups, our theory explains (1) rising wage inequality between groups, (2) rising wage inequality within groups, and (3) the polarization of work and the decoupling of the income distribution. Using a rich German data set covering a 20-year period from 1986 to 2006, we provide empirical support for our model
    Keywords: wage inequality, multitasking, tasks, organizational change
    JEL: J31 J24 L23
    Date: 2010–01

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