nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2010‒08‒28
seven papers chosen by
Maximo Rossi
University of the Republic

  1. Worker and Firm Heterogeneity in Wage Growth: An AKM approach By Kenneth L. Sørensen; Rune M. Vejlin
  2. Endogenous Voter Turnout and Income Redistribution By Go Kotera
  3. External Dimension of EU Social Policy By Werner Eichhorst; Michael J. Kendzia; Jonathan Benjamin Knudsen; Dorit Wahl-Brink
  4. Analysis of the Social Agendas By Werner Eichhorst; Stephanie Devisscher; Thomas Leoni; Paul Marx; Ulrike Mühlberger; Bernd Schulte; Barbara Vandeweghe
  5. Independent Individual Decision-Makers in Household Models and the New Home Economics By Grossbard, Shoshana
  6. The (Indispensable) Middle Class in Developing Countries; or, The Rich and the Rest, Not the Poor and the Rest By Nancy Birdsall
  7. Veblen’s Theory of the Leisure Class Revisited: Implications for Optimal Income Taxation By Aronsson, Thomas; Johansson-Stenman, Olof

  1. By: Kenneth L. Sørensen; Rune M. Vejlin (School of Economics and Management, Aarhus University, Denmark)
    Abstract: This paper estimates a wage growth equation containing human capital variables known from the traditional Mincerian wage equation with year, worker and firm fixed effects included as well. The paper thus contributes further to the large empirical literature on unobserved heterogeneity following the work of Abowd, Kramarz, and Margolis (1999). Our main contribution is to extend the analysis from wage levels to wage growth. The specification enables us to estimate the individual specific and firm specific fixed effects and their degree of explanation on wage growth. The analysis is conducted using Danish longitudinal matched employer-employee data from 1980 to 2006. We find that the worker fixed effect dominates both the firm fixed effect and the effect of the observed covariates. Worker effects are estimated to explain seven to twelve per cent of the variance in wage growth while firm effects are estimated to explain four to ten per cent. We furthermore find a negative correlation between the worker and firm effects, as do nearly all authors examining wage level equations.
    Keywords: MEE data, fixed effects, wage growth
    JEL: J21 J31
    Date: 2010–08–27
  2. By: Go Kotera (Graduate School of Economics, Kyoto University)
    Abstract: In this paper, a simple model is proposed to endogenize voting behavior that incorporates a sense of duty to vote. We assume that a sense of duty to vote is an increasing function of a person’s human capital and the public faith in politics, and those with a higher sense of duty often vote. Then, we examine the relationship between income redistribution policy and human capital accumulation. From our assumption, the voter turnout is expected to gradually increase as human capital accumulates. However, we show that, in some cases, the positive relationship between voter turnout and human capital accumulation is not necessarily hold. In addition, the effect of growing inequality on the redistribution policy is investigated.
    Keywords: Voter turnout, Human capital, Income distribution, Redistribution
    JEL: D31 D72
    Date: 2010–08
  3. By: Werner Eichhorst (IZA); Michael J. Kendzia (IZA); Jonathan Benjamin Knudsen (NIRAS); Dorit Wahl-Brink (NIRAS)
    Abstract: Study conducted for the European Parliament, Bonn 2010 (151 pages)
    Date: 2010–07
  4. By: Werner Eichhorst (IZA); Stephanie Devisscher (IDEA); Thomas Leoni (WIFO); Paul Marx (IZA); Ulrike Mühlberger (WIFO); Bernd Schulte (MPISOC); Barbara Vandeweghe (IDEA)
    Abstract: Study conducted for the European Parliament, Bonn 2010 (135 pages)
    Date: 2010–04
  5. By: Grossbard, Shoshana (San Diego State University, California)
    Abstract: Much of the recent literature in household economics has been critical of unitary models of household decision-making. Most alternative models currently used are bargaining models and consensual models, including collective models. This paper discusses another alternative: independent individual models of decision-making that don't make any specific assumptions of jointness of decision-making in households. Unitary models are typically associated with Gary Becker even though most of Becker’s own analyses of the family did not use his unitary model. This is especially the case with the specifically independent individual models presented in his theory of marriage. Decision-making models assuming independent individual household members in the Becker tradition are reminiscent of models of labor markets in which firms and workers are independent decision-makers. As basis for econometric estimations, such models may be preferable to models imposing the structure of a game or a household welfare function.
    Keywords: unitary model, household model, Gary Becker, marriage, labor
    JEL: D11 J00
    Date: 2010–08
  6. By: Nancy Birdsall
    Abstract: Inclusive growth is widely embraced as the central economic goal for developing countries, but the concept is not well defined in the development economics literature. Since the early 1990s, the focus has been primarily on pro-poor growth, with the “poor” being people living on less than $1 day, or in some regions $2 day. The idea of pro-poor growth emerged in the early 1990s as a counterpoint to a concern with growth alone (measured in per-capita income) and is generally defined as growth which benefits the poor as much or more than the rest of the population. Examples include conditional cash transfers, which target the poor while minimizing the fiscal burden on the public sector, and donors’ emphasizing primary over higher education as an assured way to benefit the poor while investing in long-term growth through increases in human capital. Yet these pro-poor, inclusive policies are not necessarily without tradeoffs in fostering long-run growth. In this paper I argue that the concept of inclusive growth should go beyond the traditional emphasis on the poor (and the rest) and take into account changes in the size and economic command of the group conventionally defined as neither poor nor rich, i.e., the middle class.
    Keywords: middle class, developing countries, growth, economics, development, poverty, human capital
    Date: 2010–03
  7. By: Aronsson, Thomas (Department of Economics, Umeå University); Johansson-Stenman, Olof (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Almost all previous studies on public policy under relative consumption concerns have ignored the role of leisure for status comparisons. Inspired by Veblen (1899), this paper considers a two-type optimal income tax model, where people care about their relative consumption, and where the importance of relative consumption increases with the use of leisure due to increased consumption visibility. We show that increased consumption positionality typically implies higher marginal income tax rates for both ability-types. Using a leisure-weighted measure of reference consumption, rather than a measure where leisure plays no role as in the previous literature, increases the marginal income tax rate implemented for the low-ability type and decreases the marginal income tax rate implemented for the high-ability type, i.e., it gives rise to a regressive tax component.<p>
    Keywords: optimal taxation; redistribution; public goods; relative consumption; status; positional goods
    JEL: D62 H21 H23 H41
    Date: 2010–08–19

This nep-ltv issue is ©2010 by Maximo Rossi. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.