nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2010‒07‒31
eight papers chosen by
Maximo Rossi
University of the Republic

  1. ETHNICITY AND CONFLICT: AN EMPIRICAL STUDY By Joan Esteban; Laura Mayoral; Debraj Ray
  2. Immigrant Assimilation, Trust and Social Capital By Cox, James C.; Orman, Wafa Hakim
  3. Understanding Rising Income Inequality in Germany By Biewen, Martin; Juhasz, Andos
  4. The Reservation Wage Unemployment Duration Nexus By Addison, John T.; Machado, José; Portugal, Pedro
  5. The Persistent Gender Earnings Gap in Colombia, 1994-2006 By Hoyos, Alejandro; Nopo, Hugo; Peña, Ximena
  6. Intergenerational Transmission of Education: An Alert to Empirical Implementation By Pereira, Pedro T.
  7. The Effects of School Quality in the Origin on the Payoff to Schooling for Immigrants By Chiswick, Barry R.; Miller, Paul W.
  8. Price and wage formation in Portugal By Carlos Robalo Marques; Fernando Martins; Pedro Portugal

  1. By: Joan Esteban; Laura Mayoral; Debraj Ray
    Abstract: This paper examines the impact of ethnic divisions on conflict. The analysis relies on a theoretical model of conflict (Esteban and Ray, 2010) in which equilibrium conflict is shown to be accurately described by a linear function of just three distributional indices of ethnic diversity: the Gini coefficient, the Hirschman-Herfindahl fractionalization index, and a measure of polarization. Based on a dataset constructed by James Fearon and data from Ethnologue on ethno-linguistic groups and the "linguistic distances" between them, we compute the three distribution indices. Our results show that ethnic polarization is a highly significant correlate of conflict. Fractionalization is also significant in some of the statistical exercises, but the Gini coefficient never is. In particular, inter-group distances computed from language and embodied in polarization measures turn out to be extremely important correlates of ethnic conflict.
    Date: 2010–07–16
  2. By: Cox, James C. (Georgia State University); Orman, Wafa Hakim (University of Alabama in Huntsville)
    Abstract: Trust is a crucial component of social capital. We use an experimental moonlighting game with a representative sample of the U.S. population, oversampling immigrants, to study trust, positive, and negative reciprocity between first-generation immigrants and native-born Americans as a measure of immigrant assimilation. We also survey subjects in order to relate trusting and trustworthy behavior with demographic characteristics and traditional, survey-based measures of social capital. We find that immigrants are as trusting as native-born U.S. citizens when faced with another native-born citizen, but do not trust other immigrants. Immigrants appear to be less trustworthy overall but this finding disappears when we control for demographic variables and the amount sent by the first mover. The length of time an immigrant has been a naturalized U.S. citizen appears to increase trustworthiness but does not affect trusting behavior. Women and older people are less likely to trust, but no more or less trustworthy.
    Keywords: moonlighting game, trust, reciprocity, immigration, experiment
    JEL: C93 J61
    Date: 2010–07
  3. By: Biewen, Martin (University of Tuebingen); Juhasz, Andos (University of Tuebingen)
    Abstract: We examine the causes for rising income inequality in Europe’s most populous economy. From 2000 to 2006, Germany experienced an unprecedented rise in net equivalized income inequality and poverty. At the same time, unemployment rose to record levels and there was evidence for a widening distribution of labour market returns, as well as that of other market incomes. Other factors that possibly contributed to the rise in income inequality were changes in the tax system, changes in the household structure (in particular the rising share of single parent households), and changes in other socio-economic characteristics (e.g. age or education). We address the question of which factors were the main drivers of the observed inequality increase. Our results suggest that most of the increase can be explained by both changes in employment outcomes and in market returns, and, to a similar extent, by changes in the tax system. Changes in household structures and other household characteristics seem to have played a much smaller role. Put into an international perspective, our results suggest that rising income inequality in non-Anglo-Saxon countries is the likely result of both increasing inequality in market returns and increasing inequality in employment outcomes, as well as of idiosyncratic changes such as tax reforms.
    Keywords: unemployment, poverty, income inequality, kernel density estimation
    JEL: D31 C14 I30
    Date: 2010–07
  4. By: Addison, John T. (University of South Carolina); Machado, José (Universidade Nova de Lisboa); Portugal, Pedro (Universidade Nova de Lisboa)
    Abstract: A thorny problem in identifying the determinants of reservation wages and particularly the role of continued joblessness in their evolution is the simultaneity issue. We deploy a natural control function approach to the problem that involves conditioning elapsed duration on completed unemployment duration in the reservation wage equation. Our analysis confirms that the use of elapsed duration alone compounds two separate and opposing influences. Only with the inclusion of completed duration is the negative effect of continued joblessness on reservation wages apparent. For its part, the completed duration coefficient suggests that higher reservation wages negatively influence the probability of exiting unemployment.
    Keywords: reservation wages, unemployment duration, control function
    JEL: J64 J65
    Date: 2010–07
  5. By: Hoyos, Alejandro (Inter-American Development Bank); Nopo, Hugo (Inter-American Development Bank); Peña, Ximena (Universidad de los Andes)
    Abstract: This paper surveys gender earnings gaps in Colombia from 1994 to 2006, using matching comparisons to examine the extent to which individuals with similar human capital characteristics earn different wages. Three sub-periods are considered: 1994-1998; 2000-2001; and 2002- 2006, corresponding to the economic cycle of the Colombian economy. The gaps dropped from the first to the second period but remained almost unchanged between the second and the third. The gender earnings gap remains largely unexplained after controlling for different combinations of socio-demographics and job-related characteristics, reaching between 13 and 23 percent of average female earnings. That gap is lower at the middle of the wage distributions than the extremes, possibly due to a gender-equalizing effect of the minimum wage. Moreover, the gap is more pronounced for low-productivity workers and those who need flexibility to participate in labor markets. This suggests that policy interventions in the form of labor market regulations may have little impact on reducing gender earnings gaps.
    Keywords: gender, ethnicity, wage gaps, Latin America, Colombia, matching
    JEL: C14 D31 J16 O54
    Date: 2010–07
  6. By: Pereira, Pedro T. (University of Madeira)
    Abstract: The intergenerational transmission of education is certainly a problem that continues to challenge most countries. The level of education that an individual rises to is linked to the education level(s) of her/his parents. This note serves as an alert to researchers undertaking empirical investigation into how the parents' education should be considered with regard to the child's. Using Portuguese data we conclude that the parents should be viewed as a unit (i.e. as a couple), and we should examine all of the different education combinations, avoiding the temptation to aggregate them in larger categories.
    Keywords: transmission of education, human capital, parent’s education
    JEL: I21 J11
    Date: 2010–07
  7. By: Chiswick, Barry R. (University of Illinois at Chicago); Miller, Paul W. (Curtin University of Technology)
    Abstract: The payoff to schooling among the foreign born in the US is only around one-half of the payoff for the native born. This paper examines whether this differential is related to the quality of the schooling immigrants acquired abroad. The paper uses the Over-education/ Required education/Under-education specification of the earnings equation to explore the transmission mechanism for the origin-country school quality effects. It also assesses the empirical merits of two alternative measures of the quality of schooling undertaken abroad. The results suggest that a higher quality of schooling acquired abroad is associated with a higher payoff to schooling among immigrants in the US labor market. This higher payoff is associated with a higher payoff to correctly matched schooling in the US, and a greater (in absolute value) penalty associated with years of under-education. A set of predictions is presented to assess the relative importance of these channels, and the over-education channel is shown to be the more influential factor. This channel is linked to greater positive selection in migration among those from countries with better quality school. In other words, it is the impact of origin country school quality on the immigrant selection process, rather than the quality of immigrants’ schooling per se, that is the major driver of the lower payoff to schooling among immigrants in the US.
    Keywords: selectivity, earnings, school quality, schooling, immigrants
    JEL: I21 J24 J31 J61 F22
    Date: 2010–07
  8. By: Carlos Robalo Marques (Banco de Portugal, Research Department, Portugal.); Fernando Martins (Banco de Portugal, Research Department, Portugal.); Pedro Portugal (Banco de Portugal, Research Department, Portugal.)
    Abstract: This paper brings together empirical research on price and wage dynamics for the Portuguese economy based both on micro and macro data. As regards firms' pricing behaviour the most noticeable finding is that prices in Portugal are somewhat less flexible than in the United States but more flexible than in the Euro Area. Regarding firms' wage setting practices, we uncover evidence favouring the hypothesis of aggregate and disaggregate wage flexibility. Despite the existence of mandatory minimum wages, the presence of binding wage floors and the general use of extension mechanisms, the firms still retain some ability to circumvent collective agreements via the mechanism of the wage cushion. The evidence also suggests that Portuguese wages behave in a fashion consistent with the wage curve literature, but the responsiveness of real wages to unemployment changes may have declined over the last decade. JEL Classification: C42, D40, E31, J30.
    Keywords: Survey data, wage and price rigidities, persistence, wage cushion.
    Date: 2010–07

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